It could get a lot tougher for first-time homebuyers to afford their first home if interest rates rise in 2016 as predicted. Our country has seen incredibly low interest rates since the great recession with sub 4% being the new norm, that is about to change. In anticipation of the Federal Reserve’s meeting this month, we’ve already seen rate start to nudge up. According to a recent article from the Washington Post, the 30-year fixed-rate mortgage has climbed from 3.75% to 4% resulting in about $600 a year in additional mortgage payments for a $350,000 mortgage.
“We are already starting to see potential buyers getting nervous and looking to make a purchase quickly before the rates rise.” said Kevin Boudreaux, a local real estate agent with CHASE Team Realty. “This is also helping to drive home prices higher at a faster pace as inventory is still extremely low.”
Curious about how much a jump in mortgage interest rates could impact your ability to purchase a home? Below is a table showing the buying power you have based on a $300,000 mortgage:
The Federal Reserve has kept interest rates artificially low to help our economy recover from the recession and to help the housing market recover. All indicators are that the housing recover is over across the country, especially here in Central Florida where we have seen consecutive months of median home price gains. The reality is that if you are on a tight monthly budget for your home purchase, now may be the time to act before interest rates rise, and they will rise.