What if Mortgage Rates go Up by 1%?
You’ve read the news, seen the posts on social media, and you've maybe even said these words yourself, “the Feds are going to raise interest rates, so now’s a good time to buy! ” But what exactly do low interest rates have to do with your ability to buy a house? Today we’re asking the question: “What would happen to your buying power if mortgage rates increased 1%?” If you like the idea of saving money on your mortgage, you’ll want to listen closely to the answer.
The most important thing you need to know is that for every 1% that interest rates rise, your buying power is affected 10%. But let’s put this in real numbers. Say a person is looking to buy a 500K home and overnight interest rates increase by a full 1%. That same person who was looking to buy a 500K home, can now only qualify for a 450K home. His buying power was reduced 50K because the cost of borrowing money is now higher.
Makes you think doesn’t it? And that’s why you’re hearing so much about interest rates lately. For the past few years mortgage interest rates have been at historical lows. We’ve been told they will be going up, but unfortunately, no one can really tell you exactly when and by how much they will increase.
So, what can you do? Well, if you’ve been thinking of buying your first home, a move-up home, downsizing or buying an investment property, now is the time to get serious about those homeownership goals. Take advantage of more "buying power". Today’s current low rates maximize your ability to buy a better home with more affordable payments than you would if interest rates rise in the future.
While no one can predict the market 100%, we make it a priority to stay up to date on influencing factors to the real estate market. We’re dedicated to helping our clients, and future clients, to making smart decisions. If you have further questions, call or text a member of the BHURDinUtah team today. We’re happy to answer your questions and advise you on next steps to secure your dreams of home ownership.