Don’t be spooked this October by high interest rates!
Here’s why:
An increase in rates will cost buyers more, yes, but it may not be as much as you think. Let’s look at an example.
A $300,000 loan with a 5% fixed rate comes out to roughly $1,610 a month. A $300,000 loan with a 6.5% fixed rate? $1,896 a month. That’s a difference of $286.
Since 1971, historical mortgage rates for 30-year fixed-rate loans have hit historic highs and lows due to various factors like inflation.
In March 2022, the Consumer Price Index, an important gauge of consumer inflation, increased by 8.5% — the largest 12-month spike since 1981. Rates were already headed higher before the inflation report, starting the year off at 3.45% in January. They’ve steadily risen each month in 2022 and are expected to continue increasing into the new year.
Keep in mind that mortgage rates are still low compared to the rates from the last 40 years. Consider October 1981. The 30-year mortgage rate was 18.45%.
Although inventory is currently increasing, fewer people are selling, and there just aren’t enough houses to go around. Houses are on the market a bit longer now because at the new mortgage monthly payment, they want a nicer home more so than one that needs repairs. Builders are still having supply issues and won’t completely catch up with demand any time soon.
For sellers; this means it is still a good time to sell. While for buyers, it is better to buy now than to wait on the hopes of interest rates decreasing as double digit interest rates may be looming.
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