One of the biggest questions plaguing the current housing market is where mortgage interest rates will be at this time next year. Over the last two months, rates have begun to creep up (see chart). (more…)
Recently, Freddie Mac published a blog post titled Mortgage Rates: Still the Deal of the Century. They explained that, if you are planning to purchase a home, now may be the time:
“If you are in the market to buy a home, today’s average mortgage rates are something to celebrate compared to almost any year since 1971.”
Some Important Points To Consider:
- The latest Freddie Mac Primary Mortgage Market Survey reports the 30-year fixed rate at 3.7%.
- Freddie Mac’s projection for Q2 2016 is that the rate will be 4.7% (a full percentage point higher)
- The Home Price Expectation Survey predicts that home prices will appreciate by 4.4% during this same time
The impact waiting a year to purchase your dream home can make on your monthly payment is significant. Contact me today to discuss your options before the experts’ predictions become reality!
Whether you are a first time or a move-up buyer, there are two factors that will impact the amount of house you can afford in your price range: home prices & mortgage rates.
Let’s look at what the experts are predicting over the next twelve months for these two areas:
The 30-year fixed mortgage interest rate is currently still below 4%. Many buyers may be on the fence as to whether to act now and purchase a new home, or wait until next year, believing they still have time to lock in a low rate.
If you look at what the experts are predicting over the course of the next 12 months, it may make the decision for you.
Predictions for 2016 2Q:
- 4.2% – Fannie Mae
- 4.7% – Freddie Mac
- 4.9% – Mortgage Bankers Association
- 5.3% – National Association of Realtors
Even an increase of half a percentage point can put a dent in your family’s net worth.
Let’s look at it this way…
The monthly payment (principal & interest only) on a $250,000 home today, with the current 3.86% interest rate would be $1,173.
If we take that same home a year later, the Home Price Expectation Survey projects that prices will rise about 4.4% making that home cost $11,000 more at $261,000.
If we take Freddie Mac’s rate projection of 4.7%, the monthly mortgage payment climbs to $1,354.
Some buyers might not think that an extra $181 a month is that bad. But over the course of 30-year mortgage you have spent an additional $65,160 by waiting a year.
The interest rate you pay on your home mortgage has a direct impact on your monthly payment. The higher the rate the greater the payment will be. That is why it is important to look at where rates are headed when deciding to buy now or wait until next year.
Below is a chart created using Freddie Mac’s February 2015 U.S. Economic & Housing Marketing Outlook. As you can see interest rates are projected to increase steadily over the course of 2015.
How Will This Impact Your Mortgage Payment?
Depending on the amount of the loan that you secure, a half of a percent (.5%) increase in interest rate can increase your monthly mortgage payment significantly.
Research released by Zillow touched on this point:
“As rates rise, new home buyers will confront higher financing costs and monthly mortgage payments. For many, this will mean tightening their budgets and sacrificing some luxuries they may take for granted today.”
The experts predict that home prices will appreciate by 4.4% over the course of 2015. If both predictions become reality, families would wind up paying considerably more for their home.
Even a small increase in interest rate can impact your family’s wealth. Meet with a local real estate professional to evaluate your ability to purchase your dream home.