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Mortgage rates are up. Here's why buyers shouldn't worry.

Mortgage Rates are up: Here's why buyers shouldn't worry

If you've been thinking about buying a house over the last few years, you've probably noticed something about mortgage rates: They're starting to rise.

According to the most recent data from Freddie Mac, 30-year fixed-rate home loans now average approximately 4.8 percent. That's up from around 4 percent back in January.

Fifteen-year FRMs, meanwhile, are following a similar path. In November 2018, they averaged 4.2 percent — nearly a full percentage point higher compared to when the year first began.

Given the climbing trend, this might suggest that it's a bad time to be in the market.

Deciding whether or not to buy is a personal decision that needs to be made in consultation with your loved ones and real estate agent. But if the direction of mortgage rates is serving as your barometer, some historical perspective may be in order.

Mortgage rates are a lot like the temperatures: They rise and fall over time. Similarly, they're influenced by multiple factors. For rates, they can include the pace of home buying, how the economy is functioning and actions taken by the Federal Reserve.

Mortgage rates were exorbitant in the 1980s

With 30-year fixed rate mortgages up from around 3.6 percent in 2012, it would seem that affordability conditions are worsening. However, if you go back to 1980, mortgage rates were much higher — considerably so, in fact.

Case in point: In 1982, borrowers paid approximately 16.9 percent (you read that right) on a 30-year fixed loan, according to archived data from Freddie Mac. That's more than three times higher compared to where rates stand today.

Real estate expert Kris Lindahl told KARE-TV that context is crucial regarding home loans and when a prospective buyer tries to determine when rates are deemed affordable.

"Historically, rates are still really low," Lindahl explained.

Lindahl added that millennials seem to be particularly cognizant of this fact, given that many are opting to buy higher-priced homes instead of entry-level houses "because they want to lock in that lower interest rate for the life of their loan."

Homeownership is gaining ground

It's these same 18- to 35-year-olds who are fueling robust growth in homeownership.

Using data from the U.S. Census Bureau, The Wall Street Journal reported that the share of Americans who own a residence reached 64.4 percent in the third quarter. However, among millennials, in particular, the homeownership rate climbed to 37 percent — a strong uptick from 2017, when long-term fixed mortgage rates averaged 3.8 percent.

"The recovery is now at this point driven by first-time home buyers and not older generations," real estate expert and economist Skylar Olsen told the Journal.

Historically low mortgage rates have helped make homeownership possible for millions of Americans, and they're clearly taking advantage while they remain in affordable territory.

What does the future rate climate look like? In short, it pays to buy now. In Freddie Mac's most recent forecast, they're projected to average in the low-5-percent range in 2019 and likely to rise to the mid-5s come 2020.

Now may be as good a time as ever to take advantage of the cost-cutting environment while you still can. Having said that, even in 2020, should rates rise further, what you'll spend in interest is minimal compared to yesteryear.