An improved economy, strong job
growth, wage growth and rising home values have contributed to a rising
interest rate environment. This means home loans, car loans, credit cards and
anything else in the U.S. that is has an interest rate attached to it will be
affected. As an experienced real estate team with over 70+ years of combined experience,
we’d like to discuss what impact rising interest rates have on St. Louis and
St. Charles County, Missouri real estate.
Rising Interest Rate Effects on
Homebuyers
For most homebuyers rising interest
rates won’t change their decision to purchase a home. However it may cause a
sense of urgency to find a home before rates rise again. It can also affect the
amount of home homebuyers can purchase within a set budget.
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.
Homebuyers concerned with rising
rates may want to lock in a rate with a lender. This will guarantee the current
rate for a set period of time. Also, homebuyers can help keep their
personal rates lower by attending to their credit score. Be sure to pay bills
on time and not overburden yourself with additional debt when considering
buying a home.
Buyers can also try different
mortgage products like new 40-year loans instead of traditional 30-year loans.
While it allows you to buy more home, the longer term means you will be paying
more for the home over the length of the mortgage. So it would be wise to
refinance with a shorter-term mortgage when able to do so.
Rising Interest Rate Effects on
Home Sellers
For home sellers, rising interest
rates means the pool of buyers for your home could shrink. For example, if all
other economic factors remain the same, an interest rate rise of 1 percent could
decrease the purchasing power of homebuyers by up to 11 percent. However the
current demand for homes by homebuyers in a real estate environment that is low
on inventory means that buyers are finding creative ways to procure the home
they want to buy despite interest rates.
Rising Interest Rate Effects on Homeowners
If you’re a homeowner who has been
thinking of refinancing, you still have time. Interest rates are expected to
climb gradually, so refinance or borrow sooner to avoid higher rates later on
down the road. Also, borrowing costs are still relatively low. So it is a good
time to get out of variable-rate debt and lock in fixed rates to insulate from
further rate increases.
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Ultimately, consumers don’t appear
to be flinching much at rising interest rates. The U.S. economy has so much
going for it that higher incomes and job availability could cover rising rates.
Regardless of your current situation, if you are considering buying or selling
a home in the current rising rate environment, speak with a member of The Boehmer Team. We have helped many homebuyers and sellers in all types of
situations. Also, we can recommend mortgage loan experts in the St. Louis area
that will help you get the best rate available for your needs.
