Have you been thinking about buying a home, but just haven’t made the move yet? It’s time to take a closer look at what higher interest rates might mean for your ability to buy a home – or to get the most home for your money. A recent report by CoreLogic, a research firm that provides insight to the mortgage and investment industries, suggests that a nearly 12 percent annual rise in buyers’ mortgage payments is anticipated by March 2019. What’s likely to happen if rates do make this sharp jump?
1. If rates go up, more of your income will be designated to cover your mortgage.
One market forecast calls for the country’s real disposable income to rise by just more than 3 percent over the next year. If rates go up just half of what they’re projected to do, your buying power will still go down. In other words, you’ll be able to afford less house for your money next year than you can now.
2. When interest rates go up, so do home prices.
It may seem counterintuitive, but a rise in interest rates also affect housing rates. When rates are up, it signals an economy that’s improving and often results in higher wages. This gives some buyers additional income to purchase more expensive homes. The increased confidence in the market can also push home prices upward.
3. Fewer lower-priced homes will be for sale.
As rates increase, homeowners are less likely to move, knowing that their next home will be more expensive. Holding on to their lower interest rate looks increasingly attractive to homeowners and reduces the number of lower-priced homes listed for sale.
4. Refinancing will become less beneficial to homeowners.
The same goes if you’re looking to refinance your current mortgage. If rates keep going up, you’ll have less room to benefit from a rate and term refinance. That’s why it’s critical to make your move sooner rather than later because higher rates might keep you in place for longer than you intend.
Simply put, a growing economy leads to inflation, which also leads to higher interest rates. In today’s competitive housing market, rising rates are challenging to young and first-time buyers – especially those who don’t have a lot of cash. But these buyers can explore financing options like FHA loans and others that are specifically designed to increase your chances of homeownership and make it more affordable.
Need help understanding how interest rates may affect your ability to buy a home or refinance? We’d like to talk to you. To search for a loan officer in your area, click here. For more information about the different mortgage options offered by FirstBank Mortgage, click here.