Uncategorized December 4, 2015

The Impact of Higher Interest Rates – Are You Prepared?

The Impact of Higher Interest Rates | Keeping Current Matters

Last week, an article in the Washington Post discussed a new ‘threat’ homebuyers will soon be facing: higher mortgage rates. The article revealed:

“The Mortgage Bankers Association expects that rates on 30-year loans could reach 4.8 percent by the end of next year, topping 5 percent in 2017. Rates haven’t been that high since the recession.”

How can this impact the housing market?

The article reported that recent analysis from Realtor.com found that –

“…as many as 7% of people who applied for a mortgage during the first half of the year would have had trouble qualifying if rates rose by half a percentage point.”

This doesn’t necessarily mean that those buyers negatively impacted by a rate increase would not purchase a home. However, it could mean that they would either need to come up with substantially more cash for a down payment or settle for a lesser priced home.

I find visual information helpful to me when making a decision. Below is a table showing how a jump in mortgage interest rates would impact the purchasing power of a prospective buyer on a $300,000 home. (Note that this chart does not include taxes and insurance in the payments provided.)

Buyers Purchasing Power | Keeping Current Matters

Bottom Line

Coupled with the rise in interest rates, the prices on homes throughout our area are continuing to rise. If you are considering a home purchase (either as a first-time buyer or as a move-up buyer), purchasing sooner rather than later may make more sense from a purely financial outlook. Are you wondering whether or not now is the time to buy? Sit down with a real estate professional to discuss your options before prices increase after the holiday season. And, as always, if I can answer any questions for you I am here to help!