If you’ve been paying attention to the news, you know that interest rates are on the rise. How will this affect your buying power? Today I want to run through a few examples that demonstrate how purchasing power is affected by rising rates.
This is a pretty time-sensitive topic, but as of late April 2022, interest rates are hovering around 5.2%. Just six weeks ago, you could get a mortgage at 3% interest. What does this increase mean for you?
If you want to keep your payment at $3,000, the highest loan you could get at a 3% rate would be $600,000. However, at a 5.2% rate, you can only afford a $490,000 loan. That’s nearly a 20% decrease in your purchasing power.
“Rates are increasing, but they’re still historically low.”
This hurts buyers’ purchasing power, and it will affect every price point. If you’re a seller in Southern California, it’s still a great time to sell. However, if your neighbor sold their home with 20 offers in three days a few months ago, just know that you might sell with two or three offers in a week or so. It’s still a great time to sell; it just won’t be as crazy as it was before.
For buyers, this unfortunately means that homes are more expensive than they were six weeks ago. However, 5.2% is still a historically good interest rate. I recommend you lock in that rate now before they rise further.
If you have questions about today’s topic or anything else, please call or email me. I am always willing to help!
