Mortgage rates are inching up but remain historically low. This trend continues to support home buying as it translates to significant savings for buyers. As overall economic recovery remains on track, rates are expected to rise to keep inflation in check.
30 year fixed 4.77%
15 year fixed 4.13%
5/1-year ARM 3.75%
30 year average for a 30 year fixed rate mortgage 8.9%
Source: Freddie Mac, Rates as of Jan 7.
PREDICTIONS: The Mortage Bankers Association is predicting that rates will inch up throughout the year; predicting that rates will be 1% higher in a year.
WHY THIS MATTERS: A 1% increase in interest rates decreases buying power by 10%. In other words, if you are looking at purchasing a $500K home today, to keep the payment the same you must reduce the purchase price to $450K if rates are 1% higher. Ten percent makes a HUGE difference in the value of the property.
BOTTOM LINE: These predictions, and those mentioned in my last post (where analysts expect home prices to increase steadily throughout 2011), mean Buyers planning to buy this year should target an earlier time frame, ideally buying in the first quarter of 2011, before these projected changes start taking place.
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Keller Williams Realty