John Pataky on how mortgage rates will impact demand

In this episode of HousingWire Daily, John Pataky, executive vice president, chief banking officer at TIAA Bank, joins the podcast to talk about the current state of the housing market, focusing on how mortgage rates could impact homebuyer demand in 2021.

Here is a small preview of the interview with Pataky, which has been lightly edited for length and clarity:

Alcynna Lloyd: Throughout last year, mortgage rates hovered near historic lows, driving homebuyer demand tremendously. Last week, Freddie Mac reported that the average mortgage rate for a 30-year fixed loan rose 5 basis points to 3.02%, marking the first time since July that the industry had seen rates break above 3%. How will this uptick impact homebuyer demand moving forward?

John Pataky: Well, I certainly think it’s going to cast a watchful eye on the part of the consumers because certainly, mortgage rates are significant factors that determine when they either enter the market or when they go on pause.  I think it’s too early in the game right now to really determine how much this movement will impact them or where the ultimate inflection point is that would cause people to step back. As you noted, with the Freddie index, rates are still extremely low and extremely attractive on a relative basis. And it still will allow a significant number of first-time homebuyers to enter the market. The key watch item is where do mortgage rates go from here? How far do they tick up? One of the things that we’ve been watching carefully is the 10-year Treasury rate. It’s a great indicator of where rates may go, and as we’ve watched this movement from approximately 50 basis points, you know, nine months ago, 10 months ago to today, where it’s hovering in the 1.5 range. And so, that trajectory is starting to indicate that maybe things are going to continue to head up. And then other experts are saying that will start to plateau. So, this early movement we’ve seen in the mortgage rates could slow down a little bit. I think over a longer period of time rates will go up. You know, I think we’ve talked about that in past discussions. It’s a matter of the pace of change, and how that potentially affects the buying power that the consumer have because right now the buying power is still very attractive at the current rate environment.

HousingWire Daily examines the most compelling articles reported from the HousingWire newsroom. Each afternoon, we provide our listeners with a deeper look into the stories coming across our newsroom that are helping Move Markets Forward. Hosted by the HW team and produced by Alcynna Lloyd and Victoria Wickham.