With interest rates rising to their highest level since July 2015, and the speculation that the Federal Reserve will raise interest rates when they meet on December 14th, some buyers got off the fence about buying.
“Rates on credit cards and home equity lines will likely increase if the Federal Reserve increases the prime rate as expected in December,” said Matt Brady, mortgage coach and sale manager at Skyline Home Loans. “We also expect the Fed to increase that base rate at least once if not twice during 2017.”
A 1% rise in interest rates equates to a 10% loss in buying power. It looks like mortgage rates could be above 5% by mid 2017. To me that is still a good rate, when I first entered real estate in 1984, fixed rate loans were over 18%! The rise in rates from 3.5% to over 4% plays out like this:
If you are a Buyer, and qualified for a $600K mortgage at 3.5% - a 4% that loan amount dropped to $570K. If you are a Seller who has your home listed at $600K, less people can afford it today. The bottom line - If your thinking of Buying, you buying power may never be better! If you are thinking of Selling, more buyers can afford your home today, than possibly tomorrow!