Minneapolis, MN: Face it, The super low mortgage interest rates are gone. Higher mortgage rates are here already, and it is very unlikely we will see them go back down anytime soon. Rather, it is anticipated that we should see 30-yr fixed rates into the mid 5% range by the middle of 2018.
HIGHER RATES = LESS BUYING POWER
As interest rates creep up, your buying power, or the maximum house price you can afford, goes down. As a ballpark quick way to think about it, every rate increase of 1% will lower the maximum house price by 10%.
A $225,000 loan at 3.75% is $1042 a month on a 30-yr fixed, while the same $225,000 loan at 4.50% is $1140, or $98.00 more per month. Another way of looking at it, is you would have to get a $206,000 loan to equal the same payment as the 3.75% rate on a $225,000 loan.
While neither of these should be deal killers for anyone looking to buy a home, it clearly has an effect on buying power, especially for First Time Home Buyers. So don’t delay, buy a home now while before anymore Fed rate hikes eat into your buying power.
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