USING NAR RESEARCH TO ADDRESS PROSPECTIVE BUYER CONCERNS “I’M WORRIED ABOUT MORTGAGE RATES”
Interest rates are in the news: Projected to rise from their historically low levels as the Federal Reserve winds down Quantitative Easing. Is this a major problem for the prospective buyer? The Answer: “Probably Not.”
Obviously, buying a home sooner rather than later in a rising interest rate environment may be a good idea. However, it is unlikely that changes in interest rates of the magnitude currently expected will have a controlling impact on the home purchase decision.
What do rising interest rates mean? As of March, the 30 year mortgage interest rate was approximately 3.8 percent. On a median priced $202,000 house, monthly payments would be approximately $1231 per month (P&I: $847; Taxes: $219; Insurance $75; PMI $90).[1] A .5% interest rate increase to 4.3 percent would raise payments to $1,284.
Rather than worrying about interest rates– over which they actually have little control outside of shopping around among lenders– potential home buyers need to focus on the availability of mortgage money—typically regional and community banks and credit unions as well as national lenders–and staying within a reasonable budget.
Source: economistsoutlook.com, Jed Smith, Managing Director, Quantitative Research.