With interest rates continuing to rise, your purchasing power as a home buyer is decreasing. Rising interest rates negatively affect the amount of home you can buy, as the increased cost of financing a home adds to your monthly housing costs. This can drive you over budget and into unmanageable or undesirable costs for what may be the perfect home for you. The following graphic demonstrates the impact interest rates have on cost.
If you are a buyer aiming to keep your monthly housing cost between $4600 to $4700 per month, the difference of an interest rate of 3.75 vs. 5.25 would be a full $100,000 of your purchasing power. Buyers looking at homes of higher value should expect more severe hits to their purchasing power.
Rolling into 2019
The interest rate you pay on your home mortgage has a direct impact on your monthly payment. The higher the rate the greater the payment will be. That is why it is important to know where rates are headed when deciding to start your home search.
How Will This Impact Your Mortgage Payment?
Depending on the amount of the loan that you secure, a half of a percent (.5%) increase in interest rate can increase your monthly mortgage payment significantly.
Mark Fleming, chief economist at First American says, “The Federal Open Market Committee (FOMC) meeting is just around the corner and a rate hike is almost certain, according to experts, which will trigger conversations about rising mortgage rates across the housing industry. While changes to the federal funds rate won’t necessarily spur further increases in mortgage rates, mortgage rates are expected to rise nonetheless”. [via MarketWatch.com ]
If the predictions of interest rates increases become reality, families would wind up paying considerably more for their next home.
Current trends in federal interest rates indicate a continued increase over 2019, and will affect purchasing power. Even a small increase in interest rate can impact your family’s wealth. Wondering where you stand? Questions about home prices? Let’s get together to evaluate your ability to purchase your dream home.