Published March 16, 2021

How Interest Rates Have Affected Our Market

Written by Bell Henderson Team

How Interest Rates Have Affected Our Market header image.

Here’s how interest rates impact our market with a real-life example.

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We’ve been listening to and reading all the economic information we can, and interest rates have remained at all-time lows for the past year. However, this week, rates hit 3% for conventional loans. Here’s what this means for you: As an example, let’s say you get a $548,000 loan in the current market at a 3% interest rate. (You can follow along with this example starting at 1:22 in the video above). Let’s say you put down 20%, which is what most conforming loans require. So your loan limit plus 20% equals a purchase price of $685,000, and you would pay $2,310 per month on principal and interest only. At the beginning of this year, we were at a 2.65% average interest rate, so that same home would have cost $2,208 per month. That means we’ve seen a 5% increase from the beginning of January to the beginning of March. We don’t want to see interest rates increase to 4%. We don’t believe that will happen soon, but it could. If interest rates rose to 4%, your monthly payment would grow by 14% to $2,616.

"Buy a property before interest rates increase."

If a buyer were to say their budget is $2,310 per month and interest rates climbed to 4%, that same payment that bought a $685,000 house before would only buy you a $600,000 house now. This equals a 14% decrease in your buying power. This is a great example of how this works for both buyers and sellers because if interest rates inflate, then we’ll see more stabilization in pricing. So even though we have incredibly low inventory, we’ll see fewer buyers in certain price points. The key message is to buy a property before interest rates increase, though, of course, there’s also the lack of inventory to consider. However, if you’re on the fence about moving, start the conversation today. You can lock in a rate for up to 45 days. If you’re interested in buying a home, let’s discuss that today. We can get you connected with some trusted mortgage brokers and lock in that excellent rate. If you want to talk about buying or any other real estate topic, call or email us. We would love to be your real estate resource.

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