I remember when my wife and I were house hunting in the mid-1980s. Housing prices were rising and interest rates were rising. We were wondering if we'd really be able to afford a house if the trajectory on pricing and interest kept rising. We had been looking for a bit and were getting antsy BUT we knew the market. Finally, we found a home that was underpriced and needed updating. We offered full price with a credit for the replacement of the septic. The interest rate was locked in at 13%. The one thing we were certain of was interest rates will come down at some point. They eventually made it to 18%. Interest rates did fall and each time they fell by 2 points we refinanced. We also paid extra principal.
The point is, rising rates may be of concern but don't let that deter you. I suspect we will see rates near 6% or more, maybe, before they cycle back down and settle in. The longer you wait to pull the trigger the more it will cost you. Have your game plan ready to enact when rates start moving down after the rise. They will!
Below is an article and a graph that shows the monetary impact of rising rates. Thank you KCM.
In the last few weeks, the average 30-year fixed mortgage rate from Freddie Mac inched up to 5%. While that news may have you questioning the timing of your home search, the truth is, timing has never been more important. Even though you may be tempted to put your plans on hold in hopes that rates will fall, waiting will only cost you more. Mortgage rates are forecast to continue rising in the year ahead.
If you’re thinking of buying a home, here are a few things to keep in mind so you can succeed even as mortgage rates rise.
How Rising Mortgage Rates Impact You
Mortgage rates play a significant role in your home search. As rates go up, they impact how much you’ll pay in your monthly mortgage payment, which directly affects how much you can comfortably afford. Here’s an example of how even a quarter-point increase can have a big impact on your monthly payment (see chart below):
With mortgage rates on the rise, you’ve likely seen your purchasing power impacted already. Instead of delaying your plans, today’s rates should motivate you to purchase now before rates increase more. Use that motivation to energize your search and plan your next steps accordingly.
The best way to prepare is to work with a trusted real estate advisor now. An agent can connect you with a trusted lender, help you adjust your search based on your budget, and make sure you’re ready to act quickly when it’s time to make an offer.
Serious buyers should approach rising rates as a motivating factor to buy sooner, not a reason to wait. Waiting will cost you more in the long run. Work with a real estate professional to understand your budget and how you can be prepared to buy your home before rates climb higher.