There have been rumors of 5% – 6% interest rates for over 2 years now– the only difference between then, and now, is that now it’s happening. The new normal for a Conventional home loan above 65% loan to value is going to fall into the 5% interest rate range by the end of 2018. I suspect that we will see interest rates in the mid to high five percent interest rate range, and possibly start seeing some in the 6% range on a conventional cash out above 65% loan to value, with a credit score under 680.
According to Freddie Mac’s latest Primary Mortgage Market Survey, interest rates for a 30-year fixed rate mortgage are currently at 4.61%, which is still near record lows in comparison to recent history! The interest rate you secure when buying a home not only greatly impacts your monthly housing cost, but also impacts your purchasing power.
Purchasing power, simply put, is the amount of home you can afford to buy for the budget you have available to spend. As rates increase, the price of the house you can afford to buy will decrease if you plan to stay within a certain monthly housing budget.
The chart below shows the impact that rising interest rates would have if you planned to purchase a home within the national median price range while keeping your principal and interest payments between $1,850-$1,900 a month.
From the Freddie Mac’s interest rate chat below, you can see that we’ve been spoiled with the ultra-low interest rates over the past few years. And, while rates are moving up, historically, they have been MUCH higher. Be thankful that you can still get a better interest rate than your older brother or sister did ten years ago, a lower rate than your parents did twenty years ago, and a better rate than your grandparents did forty years ago.
Our team of home loans professionals are likely in your local community and we’d love to talk to you about your financial and homeownership goals.
firstname.lastname@example.org or (800) 376-4603