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Why Interest Rates Matter

1/24/17 1:59 PM / by Antonio Lopez

Antonio Lopez

Interest Rates influence your purchasing power.  In short, the lower your interest rate, the higher price you can afford to pay for the house.  

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Why Do Interest Rates Matter when Buying a House? 

 

According to Freddie Mac’s latest Primary Mortgage Market Survey, interest rates for a 30-year fixed rate mortgage are currently at 4.09%, which is still very low in comparison to recent history!

The interest rate you secure when buying a house not only greatly impacts your monthly housing costs, but also impacts your purchasing power.

Purchasing power, simply put, is the amount of home you can afford to buy for the budget you have available to spend. As rates increase, the price of the house you can afford will decrease if you plan to stay within a certain monthly housing budget.

The chart below shows what impact rising interest rates would have if you planned to purchase a home within the national median price range, and planned to keep your principal and interest payments at or about $1,100 a month.

With each quarter of a percent increase in interest rate, the value of the home you can afford decreases by 2.5%, (in this example, $6,250). Experts predict that mortgage rates will be closer to 5% by this time next year. 

Again, just because you can afford a more expense house doesn't mean you should necessarily buy it, but it a lower interest rate certainly gives you more flexibility when Setting Your Buying Criteria.

 

Act now to get the most house for your hard-earned money.

 

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Topics: Buy

Antonio Lopez

Written by Antonio Lopez

Antonio Lopez is Founder and Designated Broker at Fresh Look Real Estate. He entered the real estate industry in 2001 working primarily with retail buyers. From there, he expanded into representing sellers, high end clients and investors and began personally investing in 2014. He started Fresh Look in 2016 and loves every day serving his team and his clients!