Experts are predicting an increase in mortgage interest rates in the near future. Here is how this will affect home affordability.
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Mortgage interest rates have remained at historic lows, but how long will it be until we see a spike in rates? Today I’d like to take a closer look at interest rates and let you know where I think they’re heading.
Right now, we’re looking at about a 3.5% interest rate for a 30-year mortgage, and even lower in some cases with 15-year or 10-year mortgages. However, Fannie Mae, the National Association of Realtors, and the Mortgage Bankers Association have all been hinting at an increase in rates soon. They’re predicting a .25% increase within the next 30 days or so.
They’re also forecasting that over the course of the next four quarters, we’ll see up to a half percentage point increase. This may not sound like a big deal on the surface, but let’s take a look at how these numbers will affect affordability.
On a $250,000 loan at the current 3.5% interest rate through a 30-year term, interest payments would equal about $154,000. This is a lot of money. However, at a 4% rate, your interest payments would increase to $179,000. I don’t know about you, but I have a lot of other ways I’d like to spend that $25,000 difference!
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Take advantage of these low interest
rates while you can.
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rates while you can.
This possible interest rate increase affects home buyers and puts pressure on home sellers since buyers will have decreased purchasing power.
Here’s another scenario to consider. When I started my real estate career in 2005, the average interest rate was 6.5%, which, at the time, was considered pretty low compared to previous rates. In 2008, these rates were lowered in an effort to stimulate the market after the crash.
If interest rates do rise to 6.5% again, which I think they eventually will, that same loan amount of $250,000 over a 30-year loan would equate to a $289,000 interest payment. That means you would pay more in interest than you are for the property!
Take advantage of these low interest rates now. If you’ve been thinking about buying a home, now is absolutely the time to do it. Alternatively, it’s a fantastic time to sell your home as well. Low inventory means that even though we’re in a fall market, you’ll face far less competition when selling your home.
If you have any other questions about taking advantage of our market while you can, give me a call or send me an email. I’d be happy to help you!
If you have any other questions about taking advantage of our market while you can, give me a call or send me an email. I’d be happy to help you!
