Interest Rate Purchasing Power Chart

Interest Rates in 2017

Here is an article I found about the interest rates rising and what that means for buyer’s and seller’s.   The whole time I have been in real estate the mortgage rates have been actually very low.  They continue to be historically low not too.  Back in 2012 the interest rate was 3%!!! If only I could have bought then.  Currently my home is at a 3.75% interest rate and I bought in April 2014.  Right now I’m seeing interest rates up to 4%+ (rates depends on everyone borrowers personal situation, of income, credit, debts etc…)  which is still pretty low.  If you could buy right now though why would you wait even more time, and then kick yourself when rates go up to 4.5% and 5%.  

Unfortunately one result of a booming steady economy means that rates will be higher because more people can pay it.  Now is such a good time to buy and live in a property if you are able and start paying it down, or sell and get more money out of your property.   As a buyer for every interest point added on, you lose about 10% buying power, and that can knock you out of your dream home price range.  As a seller if you try and sell during the interest rate switch and have not owned your property for a long time you are going to have a very difficult time recouping all your money.  If they’re saying that rates  will jump almost a point by the end of the year, and you are currently qualified to buy a home why would you wait and lose purchasing power???

 

Help Clients Keep Rising Rates in Perspective

Since the presidential election, mortgage rates have risen from 3.5 percent to about 4.2 percent, increasing the borrowing costs of would-be home buyers.

The rates are rising on the expectations of greater business activity and a stronger economy. But the good economic prospects may come at a price to home buyers.

Nevertheless, make sure your clients keep perspective. In the 1970s, the average 30-year fixed-rate mortgage was 8.9 percent; in the 1980s, it was 12.7 percent; in the 1990s, it was 8.1 percent. The first decade in 2000s, rates averaged 6.3 percent. Suddenly, that 4.2 percent rate may not look so bad in a historical context, eh?

“Nonetheless, many consumers with a short-term memory, especially among the young, have often witnessed sub-4 percent rates and the latest rising rates feel financially discomforting and discouraging,” notes Lawrence Yun, the chief economist for the National Association of REALTORS®, in his latest column for Forbes.com.

Yun cites the following example: Take a typical home priced at $235,000. The mortgage borrowing amount is $200,000. A monthly payment would be around $898 at a 3.5 percent mortgage rate. As rates rise to 4.2 percent, that monthly payment jumps to $978. At 5 percent, the monthly payments would rise to $1,074. And if rates were ever to return to those levels from the 1980s, payments would surge to $2,166.

Yun and other economists aren’t predicting any such rate jumps like those of the past, however. Yun predicts mortgage rates to average 4.5 percent to 4.8 percent by the end of the year, and 5.5 percent by the end of 2018.

“Rising rates are no doubt pinching the family budget of would-be home buyers,” Yun says. “However, as long as the rate rises are gradual such that salaries have time to rise more strongly to mitigate some of the sting of higher mortgage payment, consumers should view these as still historically attractive mortgage rates.”

Source: “Stressed Over Higher Interest Rates?” Forbes.com (Jan. 5, 2017)

If you have any questions, comments or need friendly real estate advice do not hesitate to reach out to me! I’m here for all your Alaska Real Estate needs!  

-Kaitlyn                                                                                                                                                                                                                                                                                                                                                                                                                                                                907-414-1664                                                                                                                                                                                                                                                                                                                                                                                      Kaitlyn@alaskarealestatelady.com                                                                                                                                                                                                                                                                                                                                                  www.alaskarealestatelady.com