Mortgage rates for 30 year fixed mortgages have risen to the highest level in 2 years according to a CNN Money article on July 11th. Rates on April 25th were hovering around 3.40% and on July 11th, the spiked at 4.51%. The Fed’s Ben Bernanke, said the Fed would soon start tapering off its purchases of up to $85 billion a month in bonds and mortgage-backed securities, a stimulus program designed to keep borrowing costs low.
So, interest rates are going up (some), BUT if you look at your investment account, you’ll probably notice a nice bump in your investments. We’ve all heard the cliche, you can’t have your cake and eat it too, well, that certainly applies in this case.
What does this mean for buyers?
Well, it means that for every $100,000 your finance, you’ll pay around $65 more per month. If this is your first mortgage, congratulations, rates area still at historically low rates. Ask parents or grand parents if they remember when mortgage rates were 18% (or higher).
The bump in interest rates may knock a few buyers out of the price range of your house. Savvy shoppers know what they can afford and have probably estimated mortgage payments based on a higher rate than whatever is current. If you are buying a new house (and you probably are), then you’ll have to pay a little more for your next mortgage too.
Earlier this week, the Fed seemed to calm fears about an early end to its bond buying program and, as a result, there was some speculation that mortgage rates would start to drop again.
At the end of the day, we suggest our buyers figure out how much home they can afford using a conservative interest rate. Once you find the house that fits your needs, the difference in 3.40% and 4.51% will be a distant memory.
We pulled some of this information from a great CNN Money article – “Mortgage rates reach highest level in 2 years” – Link to entire article