(Please note this article is not designed to be financial advice. Please call us and we can talk about your exact situation. 970-375-1291)
The Federal Reserve has raised interest rates three times this year, and more are likely to come. That means mortgage rates will increase as well. But how much does that affect home buying power? And when should you buy or sell if rates go up?
What the mortgage rate rise means for home buyers?
If you’re a home buyer who’s been waiting for interest rates to fall, you may be disappointed by the latest numbers. According to Freddie Mac, the average 30-year fixed rate mortgage is now in 5 percent range at the time of this blogs—its highest point since April 2014 and just above where it stood at the end of 2017.
For some buyers, that means they’ll have to spend more on their monthly payment than they could have hoped for when they first started looking for a home. For others who have already signed papers but haven’t closed yet, check with your mortgage broker and see what it means for you.
How interest rates rise and fall
The impact of rising interest rates on home buying power depends on the direction and magnitude of the rate hike. If short-term rates increase by just a quarter of a percentage point, it may not make much difference to your monthly payment. But if long-term rates go up by 1 percent or more, that could have a significant effect on how much house you can afford.
As for home sellers? You’re unlikely to see any immediate impact as long as there aren’t major changes in overall market conditions; for example, if there’s an influx of new homes for sale in their area or a drop in demand for homes overall (due perhaps to higher interest rates).
Use a mortgage calculator to see what your payments would look like with a higher rate.
Use a mortgage calculator to see what your payments would look like with a higher rate. It’s important to calculate how much more you can afford for your next home before you start shopping for one, so that you don’t fall in love with something and then realize you can’t afford it.
You may need to save more money or look at cheaper homes. If your budget has been affected by rising mortgage rates, it might mean buying a less expensive home than the one you had originally planned on buying—or waiting longer before making the purchase altogether.
Should you wait to buy a new home?
If you are looking to buy a house in the next few years, it may be worth waiting until mortgage rates fall again. But if you’re buying your first home, it can be difficult to find one that fits within your budget and is within your desired area. Waiting for interest rates to drop could mean missing out on a great deal on your dream home.
How do I know what is best for me?
You need to consider your personal situation, the market, and your financial situation. You also need to be realistic about your financial goals and future needs. Finally, you need to think about how these two factors interact with each other. Your mortgage is an investment in yourself—so think long term!
Conclusion
The bottom line is that rising mortgage rates will make homeownership more expensive, but they won’t take away your ability to buy a home. If you’re planning on purchasing a new home in the near future, don’t let rising interest rates scare you out of making an offer. Instead, use them as an opportunity to negotiate with your seller and find ways to reduce costs so that a higher monthly payment doesn’t have to mean less buying power.
The best advice I can give is this: Don’t get caught up in the fear-mongering over rising mortgage rates and what it means for homeownership—it’s normal for this type of thing to happen from time to time! Just keep calm and carry on doing what you can afford when it comes down to it; at the end of the day, nothing else matters except finding something that makes sense for you and your family.
After reading this if you still have question or concerns, please call us and we can talk about your exact situation. 970-375-1291