Interest Rates Are Going Up: What This Means for Home Buyers and Sellers
Interest rates for a 30-year fixed loan have gone up over the past three weeks.
According to the Freddie Mac Weekly Survey released May 23, rates for a 30 year fixed mortgage have gone up from 3.42% May 9th to 3.51% May 16, and then to 3.59% last week. Yesterday the interest rates reached 4.0%.
The average on the 15-year loan jumped to 2.77% last week, up from 2.69% May 16th.
Interest rates are still holding at record low levels, which have helped to boost home sales and help the housing market improve. Buying a home is still very affordable. You can use our mortgage calculator to find out how much your monthly payment would be on a home. To find out different types of loans that are available, visit our Mortgage Loan page.
But what will this upward trend in interest rates mean for home buyers and sellers?
What This Means for Home Buyers
Interest rate fluctuations have a huge impact on home buyers. For instance a month ago, when the average conventional rate was at 3.25%, a monthly payment on a $350,000 loan would be $ 1,523. With today’s rate of 4.0%, the monthly loan would jump to $1,671, a difference of $148 a month.
If you’re looking to buy a home and you got pre-approval for a certain amount a month ago, you should go back to your mortgage broker to see how these higher rates change your mortgage payment and what you can afford. With these higher rates you won’t get approved for as much. For instance, if you were approved for a maximum of $350,000 a few weeks ago, at today’s rates you would now be approved for a maximum of $325,000.
What This Means for Home Sellers
People selling their homes will be affected by this increase as well. For example, if you are selling your home for $350,000 and you receive an offer on your home, you’d have to make sure the buyer locked in the lower rate. If not, you may want to ask your buyer to get approved again. It is possible that the new approval may be at a lower amount that isn’t enough to cover the price of the home. This is typically more likely to happen for people who are putting down less than 20% because the numbers tend to be tighter.
In closing we want to remind everyone the rates are still historically low and will continue to be for some time. But the Federal Reserve has stated that they may ease up on various programs that are pushing and holding rates down.