If you are debating whether to purchase a home now or wait, maybe this information can be helpful to you.
The low-interest rates that we had during 2020 and 2021 were a strong effort from the government to keep the economy active. Low-interest rates incentivize spending because everything is easier to purchase; everything is cheaper, from credit cards, personal loans, mortgages, and auto loans. So we got spoiled with such low rates, and hearing that they are increasing is causing some paranoia.
The US economy is going through a solid economic growth process after the pandemic. This has caused inflation to hit record numbers that we had not seen in the last 40 years. And one of the strategies the Fed uses to attack this inflation is an aggressive plan to increase interest rates.
As a buyer, this directly affects you because the monthly payment for a mortgage may vary considerably depending on the interest rate. Here’s an example:
Loan amount
Fixed rate at:
Monthly payment for a 30 yr mortgage (approximate amount, may vary)
$1,000,000 4% $4,774
$1,000,000 5% $5,368
$1,000,000 6% $5,996
As you can see, the same $1,000,000 mortgage payment will increase your monthly payment by more than $1,000 with just a 2% variation in rate.
In 2022 we have seen a steep incline in interest rates, going from higher 3%s to low 6%s. So many buyers are starting to wonder if they should wait until rates go down. The bad news for these buyers is that interest rates will not go down; we actually expect them to continue to climb throughout the remainder of 2022.
And at the end of the day, we still have low-interest rates. The average rate in the last 40 years has been 7.77%. But we have even seen times with rates over 18%!
So if your question is if either you should buy now or wait a few months, then I would encourage you to do it now so you can lock in a, still, meager rate.
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