Interest rates are going up, but what does that mean for buyers? Well, it’s not a good thing.
Most interest rate movement is negligible, but for every point that it goes up, you lose 10% of your buying power. If you have a $250,000 mortgage, each point costs you around $150 more each month. If the rate goes up, you’re paying for it.
Affordability has been at a 40-year low, but it’s creeping back up. The government has stopped conducting quantitative easing, which means they’re no longer spending money to artificially keep bonds low. Now that it’s ended, rates will begin to go up. If you want to buy a house, you should now.
If you’re approved for a $200,000 mortgage but rates go up 0.5%, you’re losing 5% of your buying power. You can now only afford a $190,000 home. A 1% increase in rates will drop your buying power on that same property down to $180,000. You can see how a small change has a big effect.
With interest rates going up, now is the time to think about buying. Feel free to reach out to us—we can get you on the right road toward homeownership, answer any questions you may have, and give you more information. We look forward to hearing from you soon.