When our new Fed Chairman, Ben Bernecke, implies more rate hikes in his efforts to curb inflation and stabilize the economy, it ripples through the mortgage community. In general, mortgage rates go up in response to rate hikes. Buyers are more concerned that the monthly payment is affordable, than with the bottom line cost of the house.
On 30 year fixed rate mortgages, when the rates go up 1%, buyers lose 8% of buying power. For example, the buyer looking for a $500,000 home at 5.78% interest, can only afford a $460,000 home when rates go to 6.78%.
Other costs such as tax re-evaluation, increased heating and cooling costs, increased transportation costs all add to monthly expenses which deduct from home buyers’ funds available for mortgage payments.
On 30 year fixed rate mortgages, when the rates go up 1%, buyers lose 8% of buying power. For example, the buyer looking for a $500,000 home at 5.78% interest, can only afford a $460,000 home when rates go to 6.78%.
Other costs such as tax re-evaluation, increased heating and cooling costs, increased transportation costs all add to monthly expenses which deduct from home buyers’ funds available for mortgage payments.
No comments:
Post a Comment