Mortgage Interest Rates on the Rise

Mortgage Interest Rates Rising, Buy now

Mortgage interest rates are currently the highest they have been in four years...hovering around 4.5% for a 30 year fixed rate mortgage.  While still historically low based on the past few decades, we have become used to rates being at or under 4%.  This may not seem like a significant increase, however, for some buyer's, it may mean not being able to purchase a home because they no longer qualify or having to reduce the price range in which to make a purchase.  With the low inventory here in Shelton and surrounding areas, especially in the $200,000 price range, this rate increase will significantly impact the first-time home buyer's in our market. 

The higher mortgage interest rate will mean that buyer's will have to pay more for a home than when rates were lower.  For example, a buyer who took out a mortgage of $200,000 to purchase a home back in December when rates were about 3.875 would have a mortgage payment of $940/month (without taxes, insurance or private mortgage insurance).  If the same buyer takes out the same mortgage now, with rates at 4.5%, their monthly payment would be $1,013.  This $73. monthly increase amounts to $26,280. over the life of the loan.

The good news is that this increase follows a strong job growth in January with better than expected results. According to CNBC, nonfarm payrolls increased by 200,000 which is higher than the 180,000 that were expected.  Even better news is that hourly wages have increased by 2.9 percent on an annualized basis, which is the largest increase since 2009.  The unemployment rate of 4.1% is at a 17-year low.  All of these factors point to a much better economy.

The question now is "How will this effect the spring housing market"?  With less buying power due to rate increases, home buyer's are still faced with the lack of inventory that exists in the market right now.  There are more buyer's than seller's today, so the rising interest rates will probably not effect the market significantly in my opinion.  If the market is anything like it was last spring, we will still continue to see homes selling quickly that are priced correctly.

Joyce Marshall

Joyce Marshall is a real estate agent with Carey & Guarrera in Shelton, CT who is a specialist in residential home sales in and around the Shelton area.

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