Mortgage Rates Reached a 22-Month High

If you have been keeping up with the news, you maybe already know that inflation is the highest it has been in 40 years, according to the latest data released by the Bureau of Labor and Statistics (BLS). How does this effect you and your halal home financing needs?

Well, rising market conditions will affect your rates when applying for Islamic financing, it will be in parallel to how the mortgage market conditions are. Here are some points to know:

• The average 30-year fixed mortgage rate increased for the fourth consecutive week to 3.75%
• Rates haven’t been this high since March 2020 — nearly two years ago
• Recent increases are consistent with the rising rates many experts have long predicted for 2022
• Federal Reserve Chairman Jerome Powell recently announced the Fed would begin winding down pandemic measures to support the economy, which is likely contributing to rising rates
• Inflation is the highest it’s been in 40 years, according to the latest data released by the Bureau of Labor and Statistics (BLS) — it’s a key driver of rising rates, experts say
• Recent increases contradict speculation that surging COVID-19 cases and the Omicron variant might cause rates to decrease or remain flat
• Despite the increase, mortgage rates are still historically low — and lower than prepandemic levels

Here’s What This Means for New Homebuyers

• If you were pre-approved when rates were at their all time low (2.875% for example) you might want to reach out to your Islamic home financing provider and ask for them to reevaluate your qualifications. The loan amount that you qualified for before, might not be the same amount you will qualify for now. Before checking out the listing of that sweet craftsman house you have been eyeing for the last month that is exactly next to the masjid, make sure it is still in your price range.
• Your monthly payment will not be the same as you might expect it to be. With the increase in rates, make sure you understand how it will affect your monthly payment on your potential house purchase.

Plan ahead:

• Knowing how much house you can afford
  • Don’t rush into a home purchase
  • Sticking to a homebuying budget
  • Finding an experienced real estate agent you’re comfortable with 
  • Plug and play your estimated figures into IjaraCDC’s payment calculator and see what a comfortable monthly mortgage payment will look like. 

Here’s What This Means for Existing Homeowners:

• Homeowners who are on the fence about refinancing may want to consider it. Mortgage rates are expected to continue their upward trajectory in the long term, so it may be worth crunching the numbers with an Islamic financing consultant to see if you can benefit.  A good rule of thumb is if you can score a new mortgage rate that is close to 0.75% lower than your current rate, it could be a good move to refinance. 
• A rate and term refinance could go a long way in reducing not only your monthly payments but also the amount of profit paid over the life of the loan. With home values across the country having increased over the past year, you could also take advantage of the increased equity in your home by doing a cash-out refinance, home equity loan, or HELOC. These can be a useful tool to help pay off high-interest debt, pay for college expenses, or fund a home improvement project. 

Knowledge is power, let us help you crunch your numbers or figure out the best options for your home halal home financing needs.