The Fed has already raised interest rates a couple times this year, but we could see another increase in the future. I’ve laid out a couple things that buyers can expect if this happens.
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Buying a Phoenix Home? Search all Homes for Sale
Selling a Phoenix Home? Check out our FREE Home Value Report
Today I’m joined by my preferred lender, Tom Ross with the Ross Team at Bay Equity Home Loans, to answer a question that we’ve heard quite a bit lately: Are interest rates going up?
The Federal Reserve has already raised interest rates a couple of times this year, and it’s true that rates have continued to rise since the election last year. We are expecting the federal funds rate to increase at least one more time, if not twice before the end of the year. The federal funds rate doesn’t impact mortgage rates specifically, but it sets the tone for what interest rates do in general.
If we see an increase of another point to interest rates and it impacts the mortgage rates, what does that look like for buyers? A one-point increase would erode buying power by about 10%. That means that a buyer who would normally qualify for a $500,000 loan with the current interest rate will only be able to qualify for $450,000 and see the same monthly payment.
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The Federal Reserve has already raised interest rates a couple of times this year.
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That could translate to buyers choosing homes with fewer features or smaller square footage in order to keep the monthly payment affordable. However, interest rates are still extraordinarily low and the market remains hot, so buyers won’t have to worry about that scenario just yet.
If you have any other questions about interest rates or are looking to buy or sell a home, please don’t hesitate to reach out. I’d be happy to help!
