Home loan interest rates are on the rise. Rates that had hovered around 5% for the last 9 months are now at least a quarter point higher, and likely to continue to rise. This development is hardly a surprise: the Fed announced late last year that they would cease buying Mortgage Backed Securities at the end of March, 2010. By purchasing mortgage backed securities, the Fed was keeping interest rates artificially low to stimulate the housing market. But all good things must end eventually, and it appears that the days of the 5% mortgage loan are history, at least for the time being. Read more about this at MSNBC.com.
http://www.msnbc.msn.com/id/36231595/ns/business-real_estate/
In order to find investors other than the government to purchase their mortgages, lenders are faced with offering a better return to such investors. It's not my intention to talk about the intricacies of mortgage backed securities or how banks determine interest rates. Instead, it's an opportunity to motivate buyers that a delay today can mean either higher loan payments or lesser home purchases as rates continue to buy. It's a good rule of thumb that a 1% increase in interest rates translates to a 10% decrease in purchasing power. For example, taking out a 30-year mortgage for $300,000 at a rate of 5 percent will cost you about $1,600 a month, not including taxes and insurance. But the same monthly payment at a rate of 6 percent will only get you a loan of $270,000.
Although the real estate market in Northern Michigan is still on a downward trend, that slope is gentle and appears to be levelling off. That means that while you may save some money on the purchase price by waiting, that decision to delay will cost you significantly more in your monthly payment. If you've been seriously considering purchasing real estate in the Traverse City area, then now is the time to act. I am seeing a renewed sense of confidence in our local economy, and in our local real estate market. Be part of the resurgence, and do it on terms that are favorable to you.
Comments(2)