‘I am the dummy, not the ventriloquist’ townhouse owner says after ‘golden handcuff’ mortgage stops him buying tiny home
A HOMEOWNER has been left stuck with a townhouse he doesn't want after previously securing a low-rate mortgage.
Jerrod Swanson from Lakewood, Colorado, wants to trade in his townhouse to purchase a cabin he is renting that better suits his lifestyle.
Swanson moved to his cabin in Evergreen after needing some more space for his new rescue dog Kea.
However, the extra money he would pay by purchasing the cabin due to the low mortgage rate on his townhouse means he is stuck.
"Any sane human who already owns a house does not want to buy a house right now," he told The Denver Post.
Swanson and other homeowners looking to move are stuck in what is known as the "golden handcuff" or "mortgage lock."
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Those who secured fixed-term mortgage rates of around 3% are now looking at around 7%.
For many, this makes the monthly mortgage repayments untenable and therefore moving home an even more expensive and daunting task.
"Lower interest rates would have made it an easier equation," Swanson said.
"If the rates were what they were a year ago. I would be owning this cabin by now."
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As property prices and interest rates spike, those with low-rate mortgages are "best advised to stay put," Tomas Philipson, a professor of public policy studies at the University of Chicago, told CNBC.
While this is the current situation Swanson is facing, he told the news outlet that he does not want to miss out on purchasing the dream cabin.
Swanson, like many others, feels that he is at the whim of the market and has no control over where he lives.
"I am the dummy, not the ventriloquist," he said.
"I have the strings on my hand."
As an employee of the federal bankruptcy court, Swanson is well aware of the cost of taking too much of a risk financially.
For now, he is left weighing up his options and praying that the market will change and rates will decrease.
Swanson is not alone in this issue with research by Realtor.com saying that 82% of consumers feel "locked in" by their low-rate mortgages.
Current mortgage rates and predictions
Mortgage rates for all types of mortgages are continuing to incrementally increase, according to the latest data shared by Forbes.
As of April 26, the average rate for a 30-year fixed mortgage increased to 7.75% from 7.65% on April 25.
The current average rate for this mortgage in April is 7.71%.
However, economists have predicted that over the year, mortgage rates will fall.
But, before homeowners and buyers breathe a sigh of relief, the drop is not expected to be dramatic.
"The Federal Reserve has indicated that there will likely be cuts to the short-term federal funds rate in 2024, which will put downward pressure on mortgage rates," Bright MLS chief economist Dr. Lisa Sturtevant said.
"Overall, though, rates are expected to remain above 6% throughout [2024].”
Meanwhile, First American deputy chief economist Odeta Kushi said there will be "modest declines in mortgage rates" and the "journey towards [lower mortgage rates] might be slow and bumpy."
Once mortgage rates are above 5%, homeowners are two times more likely to sell their homes, according to Zillow.
However, around 80% of people with mortgages are on a rate below 5% meaning that they would have to remortgage their new home at a higher rate and lose more money.
The average rate for a 30-year fixed-rate mortgage is around 7%, according to Bankrate.com.
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Bankrate's Chief financial analyst Greg McBride explained to the outlet that until inflation reduces and stabilizes, mortgage rates will not go down to this more desirable figure.
The U.S. Sun has previously reported on a couple who are mortgage prisoners in their house as they look to downsize now their children are grown up.