Mortgage rate moves affect how much someone can borrow. As rates fall, a veteran can qualify for a bigger loan while keeping the monthly payment in check. On the other hand, as rates move up, the veteran qualifies for less. Too much on the upside and qualifying might be out of the picture altogether. Sometimes though too much emphasis is placed on mortgage rate moves. You can read stories about how mortgage applications have fallen off and refinance activity has slowed considerably compared to this time last year. And while that may be true the sky isn’t falling. Sometimes too many so-called “pundits” scare potential homeowners away due to the perception of higher rates or not being able to qualify. But let’s hold on here.
Since the beginning of May, the 30 year VA mortgage rate has been floating around the 4.20% mark, sometimes falling a little and sometimes rising. But these moves have been in a very tight range. In fact, the last time we ever saw anything close to 4.50% was in early January. Yet as the internet needs something to write about, when a rate changes by as little as 1/8th of one percent, it’s headline material.
Let’s step back for a moment and take a look at what 1/8th of one percent really means. First, it’s a 0.125% change. On a $180,000 loan amount, the difference in monthly payment from 4.25% to 4.125% is $13 and change. Even if rates move from 4.25% to 4.50%, the difference in monthly payment is $26.54. You can’t take your friend to the movies and buy popcorn for $26.54.
Pay less attention to the actual rate and more so to what the rate represents. And don’t pay any attention to headlines screaming, “Rates moving higher!” They might be, but really, is that news?