Why Interest Rates Matter

Dated: 03/18/2019

Views: 18

Why Interest Rates Matter


Interest Rates influence your purchasing power.  In short, the lower your interest rate, the higher price you can afford to pay for the house.  

 

According to Freddie Mac’s latest Primary Mortgage Market Survey, interest rates for a 30-year fixed rate mortgage are currently at 4.09%, which is still very low in comparison to recent history!

 

The interest rate you secure when buying a house 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 below shows what 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 at or about $1,100 a month.

 

Buyers purchasing power

 

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, $6,250). Experts predict that mortgage rates will be closer to 5% by this time next year.

Image titleImage title

Image title

 

CoreLogic predicts a 4.8% appreciation in home prices in the next 12 months. Freddie Mac predicts an increase of a full percentage point in interest rates.

Again, just because you can afford a more expense house doesn't mean you should necessarily buy it, but it a lower interest rate certainly gives you more flexibility when Setting Your Buying Critiera.

Blog author image

Marco Murad

Off Market Specialist. Specialties: Buyer's Agent, Listing Agent, Relocation, Commercial R.E. I'm a real estate consultant who's made a career of an excellent track record of outstanding results an....

Want to Advertise on this Site?

Latest Blog Posts

New Hampshire HOTEL DEVELOPMENT SITE AVAILABLE

New Hampshire HOTEL DEVELOPMENT SITE AVAILABLEVital Source Realty presents the fee simple interest in, 7-acre development site (233 US-3Twin Mountain, NH 03595), approved for a 60-key select

Read More

7 Must Dos For Successful House Flipping

7 Must Dos For Successful House FlippingWatch our video belowDownload your Free Flipping Do's and Don't Guide BelowMarco here with Vital Source Realty!Here at Vital Source Realty, we are excited to

Read More

I GOT THE KEYS Virtual Home Buyer House Party Vital Source Realty Boston

It's a VIRTUAL HOUSE PARTY!!! Join me to get key info on purchasing your FIRST or NEXT home during & after COVID-19. It's totally FREE!Listen Up 🗣️...Come party and learn at our first ever🎉

Read More

Coronavirus Uncertainty Plunges On Mortgage Interest Rates

Coronavirus Uncertainty Plunges On Mortgage Interest Rates The worldwide spread of the coronavirus has sent shockwaves throughout global health care systems and governments, and the United States'

Read More