After the Federal Reserve raised the Fed Funds rate by a quarter of a point last week, the real estate industry fretted over the potential effects of higher mortgage rates on home affordability, and how that could curtail the still-wobbly recovery of the U.S. housing market.
So far, there's been no sign that the market is retreating. In fact, it seems more likely that the Fed's actions could actually be good for the housing market. Read more from CNBC here...
What happens when the mortgage interest rate increases by 1%?
While a one percent raise might not seem like much, it can significantly affect both buyers and sellers. For example, let's say you're looking to buy a $200,000 home while rates are at 5%. If rates go up to 6%, you could only afford a $180,000 home. A one percent rise in rates is equivalent to 10% of home value.
Basically, while rates are low, more people can afford to buy your home. Low interest rates make it easier for sellers to sell their homes, and buyers will get lower monthly payments. We advise that you take advantage of these low rates now, as rates will continue to rise for the next few years.
Keep in mind, rates are still historically low. Ask any one who bought a house in the 1980s!
If you have any questions, please give me a call or send me an email. We'd be happy to help you!