The Cost of Waiting: Interest Rates Edition
April 1, 2018
The Cost of Waiting to Buy is defined as the additional funds it would take to buy a home if prices and interest rates were to increase over a period of time.
As you may be noticing, interest rates have been steadily increasing. The good news is that with rates on the rise, this means that the Federal Reserve believes our economy is doing well and incomes are increasing so people can afford more, therefore being able to afford a larger mortgage.
Freddie Mac projects that by 2019, average interest rates will be 5.1%. This means the cost of waiting could be as high as $105.47 in monthly mortgage payments.
What does this mean?
For home buyers, it is important to note that even with an up-tick in interest rates, mortgage rates are still relatively low so buyers will likely not be priced out of homeownership overnight. That said, if you are on the fence about whether or not to purchase, it might be a good time to act. The higher your interest rate, the more money you end up paying for your home and the higher your monthly payment will be. Rates are still low right now. Don’t wait until rates hit 5% to start searching for your dream home.
For potential sellers, an increase in interest rates could actually be a positive thing for home sales. If the cost of borrowing is projected to increase, that might drive buyer behavior to act now rather than wait until they experience a reduction in purchasing power with increased rates. Listing your home sooner rather than later would catch that buyer while they are able to afford the most home for their money.
To understand what a change in interest rates means for you, Talk to Us!