Will An Increase in Interest Rates Stop You From Buying? 

As you may have heard on the news, the interest rates are on the rise. The news of possible Federal cut-backs on the multi-dollar purchases of Treasury and mortgage backed securities, has caused the mortgage interest rates to spike. But the question is: will an increase in interest rates stop you from buying?

Interest rates on a 30-year fixed mortgage have averaged 3.54 percent for some time now. The Freddie Mac record low dates back to 1971 with an interest rate of 3.31 percent. Last week, the national average interest rate for a 30-year mortgage jumped to 4.46 percent – the biggest jump in a one week period since 1987, according to the Federal Home Loan Mortgage Corporation.

The impact for you as the home buyer is your affordability. The higher the rate, the less house you can afford to buy. For example, a $200,000 purchase with a 3.5 percent mortgage interest rate, would give you an estimated monthly payment of $900.00.* However, if the interest on the loan jumps to say 5 percent, the amount you can afford drops by roughly $30,000 or a $170,000 purchase, in order to maintain the same $900.00 monthly payment.

In our market, housing prices are trending upward and the low inventory with high buyer demand are the cause. In reality, the sharp increase in the interest rates should not be a deal breaker for anyone who is looking to purchase a home. Mortgage interest rates, even taking into consideration the increase over the past week, are still at historically low percentages – which should make homeownership just that much more appealing.

Even if rates jump to 5 or 6 percent over the next few months, the fact is, owning a home today is still cheaper than renting – not to mention the long-term investment, tax benefits and the overall pride that comes from homeownership. 

If you or someone you know is considering a home purchase, please call the Russo Team today. Take advantage of the low interest rates now and we can help you find the right home for the right price. Frank

www.RussoTeam.com
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*Estimated payment on Principle and Interest only and does not include other related costs, such as insurance, property taxes and mortgage insurance premiums.