Home » Blog » The Impact of Rising Interest Rates

The Impact of Rising Interest Rates

As you have all heard, interest rates have notably risen in the last few months. Below is a chart to help you understand the impact of rising rates.

On May 1, 2013 a buyer could have purchase a home for $500,000 with a 20% down payment at an interest rate of 3.25% on a 30 year fixed loan and had a monthly housing payment of only $2,361.66.

Today, that same house at the same price with the same down payment could be purchased for an interest rate of 4.5% on a 30 year fixed loan with a monthly housing payment of $2,647.57; an increase of 12% or $285.91 per month .

If that same buyer waits too much longer, they could conceivably be faced with much higher interest rates and payments. Today, market news came out with unemployment data improving more than anticipated. This sent rates on another hike. If we can make a hypothetical projection based on the increase we experienced in the last 3.5 months to continue into the next 3.5 months, a 30 year fixed interest rate could increase to 5.75% which would make the same house cost $2,995.97 a month; an increase of 13% or $348.40 per month.

The outstanding question is, are we going to experience a bubble in home values to offset the rising rates? As far as we can tell, this isn’t happening nor will it. Please take action to get the fullest benefits from the current historically low interest rates. Feel free to contact us with any questions.