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A Fresh Perspective On A State of Rising Rates

Dec 2, 2016

After a year of soaking in historical low rates, it’s understandable for home buyers and industry professionals to be on the floor after the post-election spike in interest rates! However, it’s important to get off the ground and clear your head of how rates were in the mid-3’s just a month ago. To help with this, below are three facts that will quickly sober you up to the current state of rising rates:

  1. Higher rates greatly impact a buyer’s purchasing power.
    The below graph shows you the maximum purchase price eligibility on a conventional loan for a home buyer making $80,000 per year, with no debt, great credit and a 5% down payment. For every half percent increase in interest rate, the buyer’s purchasing power decreases by $20,000. At a rate of 4.5%, they could buy a house up to $485,00. However, if they waited to buy until rates increased to 5%, they would have to make the same monthly payments, but for a house worth $20,000 less.

  2. purchaseprice-eligibility
  3. “Experts” predict rates will continue to rise in 2017, 2018 and 2019.
    In my 10 years in the industry, I’ve learned that no one truly knows where rates will go. For example, a majority of the industry gurus predicted interest rates to head towards the 2’s if Donald Trump was elected. However, the exact opposite happened and we find ourselves in the 4’s. With that disclaimer stated, all the key market data does support the Mortgage Bankers Association’s interest rate forecast below that shows rates will increase to the mid-5’s over the next three years.

  4. 30-yr-avg-forecast
  5. Interest rates in the 4’s are excellent when you look at historical data.
    Locking in an interest rate in the 4’s is actually a great deal if you consider the average rate on a 30 year fixed mortgage is 8.2% over the last 46 years according to Freddie Mac’s historical data.

  6. 30-yr-avg-history

Hopefully these points helped you see the current opportunity home buyers still have by acting soon!

If you would like to get pre-approved or are interested in receiving a personalized Homeseed Buyer Profile, click the get started link below. Your profile will break down your Requested, Maximum and Recommended purchase price eligibility, along with detailing out the potential monthly payments and cash needed to close. This will give you the information you need to make a smart home buying decision!

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