Will Rising Mortgage Interest Rates Hurt the Real Estate Market?

Real Estate Agent with The Patterson Team @ Keller Williams Excellence

It's no secret that mortgage interest rates are going to rise this year, probably sooner than later, but will that hurt the real estate market?  Many of todays home buyers have never seen a 12 or 14 percent interest rate except on a credit card, but there was a time not that long ago that this was normal.  Home buyers have been extremely fortunate over the past several years to see mortgage rates at all time lows.  That cannot last forever, so as the economy grows rates will rise.  Not to an outrageous level, but the days of 4% are in the past.  Expect to see rates surpassing 5% and heading toward 6% in the year ahead.  Will this hurt the real estate market?  Only for a very small number of home buyers, mostly 1st time buyers who have a limited amount of cash for down payment, settlement fees, etc.

This is a breakdown of what principal and interest would cost monthly based on a $200,000 loan and a 30 year mortgage.  At a interest rate of:

4.5% - Principal and interest= $1014.00

   5% - Principal and interest= $1074.00

5.5% - Principal and interest= $1136.00

As you can see 1 percentage point on a $200,000 loan is equal to $122 per month or $1464 per year.  

Now that I have this information what advice do I give to my clients?  Hurry and buy now before rates rise?  Wait and see what the market will do?  Sell now?  Sell later? Of course, I would like my clients to move as quickly as possible, but what is best for them?  I need them to know I'm looking out for their best interest.





Posted by

The Patterson Team of Keller Williams Excellence  

Ray and Stacy Patterson

Joanna Chaffee 

Call or Text 443-392-2826 for information

Email us at info@PattersonTeamHomes.com

Get a FREE REPORT of your HOME'S VALUE at www.PattersonTeamHomes.com 

See more blogs entries at: http://activerain.com/blogs/rjp3588


Comments (3)

Chris Ann Cleland
Long and Foster Real Estate - Gainesville, VA
Associate Broker, Bristow, VA

The bigger deal about the rise in mortgage rates is that the buyer's purchasing power decreases.  They can afford less house.  

Mar 20, 2014 11:11 AM
Raymond Patterson
The Patterson Team @ Keller Williams Excellence - Lutherville Timonium, MD
President - Patterson Team Homes

Home prices could stop increasing or could even decline.  I've read recently that over 4 million homes have reached positive equity now after the bubble burst several years ago.  That is great news, but I would hate to see a retraction

Mar 20, 2014 11:40 PM
Kathy Smiley
Rodeo Realty ~ Fine Estates Westlake Village - Newbury Park, CA
"Real Estate results that make YOU smile!"

We have seen our prices pop up 25% in the last year. Actually, we need to see it level out here in So Cal, because affordability is tenous as it is

Mar 21, 2014 04:19 PM