Newspaper article Pittsburgh Post-Gazette (Pittsburgh, PA)

Looking for Value as Pittsburgh Mortgage Rates Go Up, Home Buyers, Owners Scope for Better Options

Newspaper article Pittsburgh Post-Gazette (Pittsburgh, PA)

Looking for Value as Pittsburgh Mortgage Rates Go Up, Home Buyers, Owners Scope for Better Options

Article excerpt

The Beaver Falls home that Linda Neely was raised in and inherited from her parents began showing its age in recent years, forcing her to make some expensive updates and repairs.

"My dad built this house," said Ms. Neely, 70. "This house means the world to me. Upkeep means everything and it takes money for that.

"When you're a homeowner, there's always going to be something the house needs and it's difficult, especially on a fixed income."

The retired fourth-grade teacher who spent 35 years in the Blackhawk School District used a Home Depot credit card to fill the gap between her pension and Social Security income. While it was a convenient way to get the work done, the credit card, which charges an interest rate ranging from 17.99 percent to 26.99 percent, turned out to be one of the more expensive ways to finance the job.

She decided a better long-term solution would be a home equity line of credit. The $20,000 line of credit she received from Huntington Bank allowed her to pay back the credit card funds and pay a much lower rate on the equity line.

As home values across the Pittsburgh region continue to rise and 30-year fixed mortgage rates jump above 4 percent, people who want to buy homes are wasting no time applying for loans, hoping to lock in rates before they go higher.

Homeowners, like Ms. Neely, also are taking advantage of lower rates to leverage the equity they have built up, although the refinance market overall has slowed down.

The Washington, D.C.-based Mortgage Bankers Association reports the refinance share of mortgage activity has been falling off and the home purchase share has been either flat or slightly rising since the fourth quarter of 2016. Interest rates began rising slowly in the fourth quarter and then picked up rapidly after the November election.

Mortgage rates tend to follow the direction of the Federal Funds rate, the overnight rate that banks charge each other to borrow money, which the Federal Reserve voted to increase earlier this month. The current funds rate is 1.0 percent. The Federal Reserve expects to raise rates two more times this year to 1.5 percent. It has signaled it will raise rates to 2 percent in 2018 and 3 percent in 2019.

Home buyers appear to be locking in rates before they increase. Mortgage applications to purchase homes were up 4 percent in February compared to February 2016.

However, refinance applications are down 44 percent in February compared to February 2016, according to the bankers association.

"Now that rates are rising, there's no advantage to refinancing because so many people have already locked in a low mortgage rate," said Lynn Fisher, vice president of research economics at the association. "But even though rates are moving up, people looking to buy homes are feeling better about their job prospects. …

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