How Low Interest Rates Increase Your Purchasing Power
According to Freddie Mac’s Primary Mortgage Market Survey,interest rates for a 30-year fixed rate mortgage have increased by half of a percentage point, to around 4.5%, in 2018. This is still significantly lower than recent history.
The interest rate you secure when buying a home not only greatly impacts your monthly housing costs, but also impacts your purchasing power.
Purchasing power, simply put, is the amount of home you can afford to buy for the budget you have available to spend. As rates increase, the price of the house you can afford will decrease if you plan to stay within a certain monthly housing budget.
The chart to the right shows the impact rising interest rates would have if you planned to purchase a home within the national median price range, and planned to keep your principal and interest payments under $2,000 a month. With each quarter of a percent increase in interest rate, the value of the home you can afford decreases by 2.5% (in this example, $10,000). Experts predict that mortgage rates will be over 5%by this time next year.
Act now to get the most house for your hard-earned money.
Information provided by Benchmark Mortgage