As we enter the era of rising interest rates – almost a certainty – many are being VERY dramatic about this topic as if this has never happened before. Some cry hysterically that rates are jumping to 10% plus. They are not. They are extremely low and hopefully will remain under 5%, which is still VERY low. We have been spoiled by many years of low interest rates. So let’s explore how in this lies some GOOD NEWS....
- Rising rates may slow inflation.
- Motivate Home buyers who have been sitting on the fence
- Reduce multiple bidders in over-heated markets with limited supply.
- Sellers may re-adjust their pricing expectations to more realistic levels.
- The excessive price increases could slow down market
- Higher rates may start to alleviate the dramatic inventory shortages
- Keep Mortgage lenders more competitive to keep volume up.
- Slower market will give buyers more breathing room
- Building costs will ease and reduce the excessive builder price-gouging
- Increase interest income on cash investments. More money to spend.
Let’s remember: a home buyer getting a 4% interest rate on a 30-year fixed mortgage on a $400,0000 home has a monthly mortgage payment of $1,900. The monthly payment for this same buyer with a 5% rate on a 30-year fixed mortgage, rises to $2,138. A 1% increase in interest raises this monthly payment by $238, or roughly 13%, a very manageable number for most in a strong economy with rising incomes.
So for those who have been waiting to buy a new home….now is the time!!