Rising Interest Rates – How they affect Buyers

Mortgage interest rates are expected to go up this year. In fact they could go up at least three times if  the Federal Reserve raise its short term interest rates. Anytime the mortgage interest rates go up, a group of buyers can no longer afford the home they want. They may be forced to purchase a smaller home, in a location that is less desirable for work, family, etc. or they may need to work for a longer time to save up more money.

30 year Fixed Rate Mortgages averaged 4.46% last week. Rate increases can add up.  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. “Buyers thought they could wait forever because rates were going to stay low forever,” says Palacios. “They’re starting to realize that if they’re going to buy, they should probably buy now.”

Now, it’s hardly likely that the rate hikes would be a full 1% overnight, and our market here in Naples won’t affect a majority of our buyers who are retired and are often paying cash for their Naples home with their lifetime of savings, the proceeds from the sale of their previous home or with a home equity line of credit on their existing home, yet it’s still best for all buyers to be aware of rising rates and their implications. It’s also important for those selling their home to know and understand the implication this will have on the market. Those with tighter budgets, typically first time home buyers, are affected with rising rates.

Every buyer needs to review their budget and in the interest of saving money, may be obliged to speed up their home buying process in order to take advantage of the current lower interest rates.

HouseofNaples.com is here to help! We are happy to answer any questions, point you in the direction of local mortgage lenders and to make possible the dream of home ownership here in South West Florida.