Senate Passes $428 Billion Farm Bill (Plus Interest Rate Updates)

Mortgage Updates

The U.S. Senate recently passed what is generally known as the Farm Bill. Why does that mean anything to a real estate or mortgage lending professional? Because the bill provides for the continuation of sugar tariffs in order to ensure the market is not flooded with sugar imports.

Whoops, sorry — wrong section of the bill.

The relevant part for us is the temporary reauthorization of the National Flood Insurance Program (NFIP). The stay provides for funding of the NFIP for another six months.

While the reauthorization lets current homeowners sleep better through the 2018 hurricane season, it also gets us through the summer and fall home buying seasons without interruption where flood insurance is required.

One thing though, is the bill — or one very similar — still needs to make it through the House. Until it does, we have until July 31st to get NFIP insurance in place, or look for private flood insurance options after that.

What’s happening with current interest rates?

While rates retreated slightly this week, the prospect of rates hitting 5% looms over the mortgage and housing markets. What will 5% mean?

Redfin asked about 4,000 consumers. They found that 5% rates will have:

  • 21% of consumers looking to other less expensive areas or looking for smaller, less expensive homes. Not a bad idea, but those are the homes with the lowest inventory levels and already the most sought after.
  • About 19% panicking and moving more quickly to buy. Fear and panic seldom result is wise decisions.
  • 32% slowing down the hunt and waiting out rates. Not a wise decision, as the Fed has stated we can expect two more rate hikes this year.

We don’t know what impact those hikes will have, but they won’t help rates go down. Basically, about three-quarters of consumers don’t seem well prepared to deal with a 5% rate, even though that is a good rate for a mortgage.

Lack of inventory is something we can’t do much about and will need to live with for the near term. We can, however, manage consumer expectations and help them make good home buying decisions. It is what we are all trained to do and do well.

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Mary Mack

Mary is the Copywriter/Content Manager at Embrace Home Loans. She loves taking complicated subjects/ideas and making them easier to understand (and enjoyable to read about). Is there a topic you'd love to see covered in this blog? Email Mary at [email protected] to let her know!