We knew the historically low mortgage interest rates couldn't last forever. Still, it was hard to hear that Freddie Mac reported an increase of nearly one percentage point on 30-year fixed loan rates in recent months, from around 3.5 percent to 4.5 percent.
How this affects the average homebuyer
For the average American buyer taking out a $270,000 loan, this boost could yield an increase of around $125 in their monthly interest payment. Those who are buying a home may have to reassess what is affordable when rates increase. Buyers shouldn't be frustrated, though - even with the recent spike in home prices and mortgage rates, home affordability is still extremely high.
Meanwhile, homeowners who have dawdled on refinancing may want to take another look while rates are still relatively low. There are many variables at play when it comes to refinancing, but homeowners with moderate to high credit scores, more than 20 percent equity in their homes, and who purchased prior to the interest rates dropping significantly, are usually good candidates. Homeowners who purchased at the height of the market could still benefit by refinancing, as today's rates are still significantly lower than they were in years past.
Homeowners can talk with a mortgage consultant to determine their refinancing eligibility, and to see if the costs of refinancing would be worth it. Buyers can meet with their real estate agent and mortgage professional to determine if an increase in rates could affect their purchasing power.
For more info about buying a home in today's market, reach out today.