Rising interest rates could have a big impact on the size and type of home that you want if you don’t act quickly. Interest rates have slowly been ticking upward the last few months, and as I write this they are showing as high as 4.875 percent for a 30-year loan at Bankrate.com.
Mortgage rates are at their highest levels in more than four years. The 30-year fixed-rate mortgage averaged 4.46 percent the week of March 5, according to Freddie Mac, and that’s largely expected to increase since the Federal Reserve said it is likely to raise its short-term interest rates this year. That could prompt mortgage rates to move higher at least three times this year, starting this month, according to the National Association of Realtors.
Rate increases -- even minor ones -- can add up over time. Realtor.com offers this example: On a $300,000 house with a 30-year fixed-rate mortgage and 20 percent down payment, the difference between a 4 percent and 5 percent mortgage rate is $142 a month. Calculated over the life of the loan, that is more than $51,000 extra.
Even though our available housing inventory in Flagstaff is still low, buyers sitting on the fence may want to make their move soon and lock in an interest rate before they go up further. Currently there are approximately 650 properties of all types on the market in the Northern Arizona MLS. Homes are selling at a brisk pace, especially those priced below $350,000.
If you are contemplating selling your home and have been waiting for spring, now is the time to put it on the market. As interest rates rise the pool of qualified buyers for your home may begin to shrink, limiting the number of people who may be looking at homes priced similar to yours.
My suggestion is that if you are in the market to purchase a home, go talk to one of our local lenders get pre-qualified and begin your search for a property. Better late than never, but don’t wait too long, as more interest rate hikes could derail the size and type of home that you want to buy.