Home Mortgage Interest Rates Going Up

By John Rives

Home sales have been going up for the last two years and are expected to rise as much as 9% in 2013. This would surpass the 5 million mark, which hasn’t happened since 2007, before the housing bubble burst. Home prices are also on the rise, up 12% from last year according to CoreLogic, an Irvine, Calif. based data firm.

interest rates going up

One of the factors fueling the resurgence of the housing market has been historically low interest rates, due in part to the Federal Reserve’s $85 billion-per-month bond buying program. With the announcement by Federal Reserve Chairman, Ben Bernanke, that the central bank would be winding down the program later this year, and possibly ending it altogether by mid-2014, we have seen a dramatic increase in home mortgage interest rates over the last couple weeks.

According to Freddie Mac, the jump to 4.46% interest on a 30-year fixed rate mortgage is the largest weekly increase in 26 years. The recent increases in mortgage interest rates have caused many on-the-fence home buyers to lock in their rates before they rise further.

For anyone that has been waiting to buy a house thinking the low prices and interest rates would last, now is the time to act, as even a one percentage point increase in the interest rates can dramatically lower the amount of money a borrower can spend on a home.

For example, say you need to keep your monthly house payment at $1,000. With the interest rate at 3.5%, if you can borrow approximately $220,000, a one percentage point rise to 4.5%, would only allow you to borrow around $197,000 to keep your monthly payment at $1,000/mo. If the interest rate goes up to 5.5%, you would only be able to borrow approximately $176,000. These figures are only approximate, and the amount of a home mortgage will be determined by additional factors such as credit rating, but even a one percentage point rise in the interest rate makes a large difference in the amount of money you can borrow for a set monthly payment. Bear in mind that you will also need to add your home insurance and property taxes into the equation. Use the McKee Homes mortgage calculator to get an idea of what your total monthly payments would be for a traditional loan.

If you are in the market for a new home in the Fayetteville NC area, please visit the McKee Homes website to view our Fayetteville new homes as well as our Fort Bragg new homes. McKee Homes offers such a great value for your money, you may find that you can buy a brand new home for the same amount or less than a pre-owned home. McKee Homes also works with a dedicated financial team to get you the lowest interest rate new home financing available with no-money-down options for VA and USDA loans.

Monthly
Payment

Max Loan at
3.5%

Max Loan at
4.5%

Max Loan at
5.5%

$900

$200,000

$177,000

$159,000

$1,000

$222,000

$197,000

$176,000

$1,200

$266,000

$237,000

$211,000

$1,500

$334,000

$296,000

$265,000

The data shown in this table is only approximate and is based on 30 yr loan with good credit rating.

 

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McKee Homes online marketing manager

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