How Will Rising Interest Rates Impact Homebuyers?

by Meridith Doucette on July 16, 2013

 

Mortgage interest rates are on the rise. We keep hearing this news but without having any real numbers, it can be difficult to determine what a rise in mortgage interest rates really means to you. A recent article by Wayne Faulkner on Star News Online, gives some details on the impact increasing mortgage rates will have on new home buyers.

Last week, Freddie Mac’s weekly survey showed that the national average mortgage interest rate rose from 3.93% in June to to 4.51% in July– an increase of over ½ of a percentage point (.58%).  As explained by Jim Wallace, president of Intracoast Realty, “Every point of interest increases the cost (of a home loan) about 10%.”

Here’s what that looks like:

For the buyer looking to secure a mortgage at $150,000, an increase of one point (or percent) in the interest rate would increase the monthly mortgage payment by $86. On a $400,000 mortgage, an increase of one point in the interest rate would increase the mortgage payment by $230 per month. These increases in monthly payment can make the difference between qualifying for a loan or not, making it more difficult for new home buyers to obtain financing for their new home.

Read the full article here.

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