Are You Ready for Rising Interest Rates?

Can’t say I didn’t warn you…

Higher Interest Rates Ahead

Interest Rates On the Rise

Several months ago I was warning buyers and sellers to make a move ASAP before interest rates move up. The ridiculously low interest rates that the Feds have kept artificially low to make the economy look better than it really is was a temporary subterfuge that must eventually give way to a substantial, if not dramatic,rise back to true market value. The difference a one point increase from 3.5% and 4.5% on a $100,000 mortgage is about $60/month or $720/year. A $300,000 mortgage, therefore, costs $180/month or $2,160/year more. If a buyer is on a fixed income, you can see how his purchasing power gets eroded quickly as rates rise. This means buyers cannot afford as an expensive a house as before – or even buy at all – and eventually home values also erode due to the law of supply and demand. The upside for sellers in a market of rising interest rates is the flurry of panic buying as buyers try to buy before rates get too high. The most opportune time for rates to rise is right after a presidential election where there’s a change in government – just as has happened last month – and so it is of little surprise that we are now seeing a the hike in interest rates that I have warned everyone about. Those who heeded are happy. Those who did not, not so much…

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