How to Approach Rising Mortgage Rates

In the last few weeks, the average 30-year fixed mortgage rate from Freddie Mac inched up to 5%. While that news may have you questioning the timing of your home search, the truth is, timing has never been more important.

Even though you may be tempted to put your plans on hold in hopes that rates will fall, waiting will only cost you more. Mortgage rates are forecast to continue rising in the year ahead.

Mortgage rates play a significant role in your home search. As rates go up, they impact how much you’ll pay in your monthly mortgage payment, which directly affects how much you can comfortably afford. For example, a loan for $440,000 at 5% interest will bring your payment to approximately $2,362.

Bump up that interest rate to 6% and your payment increases to $2,638, a difference of $276.

Instead of delaying your plans, today’s rates should motivate you to purchase now before rates increase more. Use that motivation to energize your search and plan your next steps accordingly.

Sellers also need to factor in how rising mortgage rates will affect their plans. When interest rates were hovering around 2.5%, the buyer demand was strong, with homes selling for well over list price. Now that interest rates have doubled, buyers are evaluating whether or not they are willing to go so high, or can go so high, to stay in their budget. Sellers are already beginning to see that pricing well within market value and not pricing on the high end, will result in more buyer interest.