Mortgage interest rates have found a “new normal” since the Presidential election.
We had become accustomed to 30-year fixed rate mortgages coming with rates in the “3’s” but since then we’ve settled into a new range, operating in the “4’s”. With the Federal Reserve raising the Fed rate a third time in the past four months that has prospective homebuyers wondering if they’ll be stuck with rates in the “5’s.”
Predicting rates is difficult to do. If I could make that sort of prediction I’d be on Wall Street or in Las Vegas rather than helping people with their mortgages. The experts that I follow have forecast that while the Fed may not be done with their increases, mortgage interest rates are likely to stay in this range. I would be surprised if rates moved much higher than where we are but I’d be even more surprised if we dropped down into the “3’s.”
That being said, let’s take a quick look at the impact of rate on your buying power. A .5% increase in the 30-year interest rate adds almost $60 to your monthly payment on a $200,000 mortgage. Another way to look at it is that a .5% increase in rate reduces buying power by $15,000. From the seller’s perspective, an increase in rates can potentially disqualify prospective buyers by limiting their buying power.
Historically speaking, today’s rates are still near the lowest end of the spectrum. Homebuyers have financed homes at rates MUCH higher than this and with the high cost of rents, purchasing a home will continue to be an attractive option. With the uncertainty of where rates will go, those who are in the market to buy a home should at least take the first step in getting a solid pre-approval and strategy in place. A prepared homebuyer will have the advantage and that is where the big savings can be found, regardless of rate.
Call Todd Wiggins with First Community Mortgage with any questions and/or to get a quote on today’s Mortgage Rates. 615.554.1983 (NMLS 211744)