When Interest Rates Go Up

Are You Ready if Rates Go Up?
October 13, 2016

It’s not “if” the rate goes up but “when” the rate goes up; it could make a big difference for some buyers. Freddie Mac predicts that mortgage rates will be at 4.5% in the fall of 2017.

Then, there’s the borrower who is absolutely maxed out for their monthly payment. If the interest rate goes up – the buyer has to use more down payment or get less house for the same payment. In the same example, a 0.50% increase in rate would require $14,873 more in down payment. Or find a home that is $14,873 lower in price which will not have the same amenities.  

Mortgage rates have been low for so long that some people think that is what they should be. There are some economists who believe that the economy will not be strong again until mortgage rates are in the 7% range.To see how this type of scenario might affect you, go to the If the Rate Goes Up calculator

Higher interest rates, it means higher payments. Higher payments mean buyers won’t have the money to spend on other things like furniture or improvements to the home or an unrelated purchase like a new car.

When the rate moves 0.50% on a $250,000 mortgage, the payment goes up by $70.66 a month. If it moves 1.00%, the payment goes up by $143.74 per month, each and every month for the entire term of the mortgage which means paying over $50,000 more for the house.

The question facing every borrower in this situation is “How will you feel about having to pay more to live in the same house because you were not ready to commit?”