Economists are warning that rising mortgage rates could have a big impact on the direction you choose when shopping for real estate. Rising interest rates make it more difficult to afford the home of you want.
Keep your home buying plans on track by speeding up your home search this spring, as interest rates are forecasted to move higher in the coming months.
Forty-four percent of home buyers say rate increases likely will force them to settle for a smaller, less expensive home that requires a longer commute to their jobs, according to a realtor.com® survey. First-time buyers may be most affected by rising costs, as increasing home prices and interest rates price some out of the market.
Mortgage rates are at their highest levels in more than four years. The 30-year fixed-rate mortgage averaged 4.46 percent last week, according to Freddie Mac, and that’s largely expected to increase since the Federal Reserve said it is likely to raise its short-term interest rates this year. That could prompt mortgage rates to move higher at least three times this year, starting this month.
Rate increases—even minor ones—can add up over time. Realtor.com® offers this example: On a $300,000 house with a 30-year fixed-rate mortgage and 20 percent down payment, the difference between a 4 percent and 5 percent mortgage rate is $142 a month. Calculated over the life of the loan, that is more than an extra $51,000.
Home buyers who are concerned about rising rates may want to lock in with a lender, which guarantees the current rate for a set period of time. Still, don’t linger on making a decision. It typically costs several hundred dollars to lock in a rate.
Source: “Is It Last Call for Low Mortgage Rate? Why Home Buyers Should Act Now,” realtor.com®
