How Increased Mortgage Interest Rates Affect You

increased mortgage interest rates

Interests rates are on the rise. How will those higher rates affect your qualification and monthly payment?

There is SO MUCH in the news about rising mortgage interest rates lately. It seems like just a moment ago we were seeing mortgage rates hovering around 3.75%. Those days are very likely behind us as we approach 5% and beyond on a more regular basis. While this might seem catastrophic to some, the reality is that rates below 5% are NOT the norm. The average interest rate over the last 50 years is somewhere between 8% and 9%. Regardless of that fact, increased mortgage interest rates will affect you and your ability to qualify for a mortgage AND your monthly payment. But by how much?

To easily estimate income requirements and estimated monthly mortgage payments based upon changing interest rates check out this mortgage qualification/payment calculator. You may be surprised by the numbers you see. Of course everything is relative and some may feel the change is manageable while others may be knocked out of the buyer pool based on decreased affordability. Regardless of your situation, it’s important to know how increased mortgage rates affect you.

You may have heard that  lower home prices are ALWAYS the result of increased mortgage interest rates. That’s what I heard for the early years of my curiosity about home ownership. I’m a lot smarter now and realize that the ONLY thing that effects home prices is simple supply and demand. As long as we are seeing the shortages in inventory that we’ve experienced over the last two years, prices will remain stable and appreciation will occur. Of course, if interest rates increase to the degree that it impacts affordability beyond a certain level, we will see changes in demand as the buyer pool shrinks.

What direction are interest rates expected to go for the remainder of 2018? There is nearly universal consensus that rates will only go up. If I were to go out on a limb I would predict that by the end of the year we will see mortgage interest rates hovering around 6%. If you’re hoping to purchase a home this year, the best thing you can do is talk to a lender. A good lender will be able to tell you exactly how increased mortgage rates affect you and what you can do to prepare to purchase your dream home. To learn more about some of the lenders my clients love, click here.

And for one more nibble for thought, when thinking about owning vs renting, keep in mind that rent prices are going up in the Phoenix metro market at a rapid pace. KTAR news reports a 5% increase in rental rates, which may make these incremental mortgage interest rates look not so bad after all!


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