sail boatWe all knew – or most of us – that the low interest rates we have been seeing for the past year would eventually fade off in the sunset. The 3% interest rates are now something to talk about in future years. In the past week we have seen the rates go as high as 4.5% based on the FEDs broadcast to ease up on the purchase of treasury bonds. Did the market over act, maybe – but all I know is that the rates are going up. The good news is our economy is on the upswing. The historical average interest rate is 6% to 7% which would put us in a normal market in the not too distant future.

If you are like some people who were convinced the rates were going down to under 3%, well as the say “that boat sailed”. It is no time to get on board before the interest rates go even higher. There is a possibility we will see 5% by year end. A 1% increase in interest rates reduces the affordability by 10%. Meaning if you were qualified for a $500,000 loan you may only qualify for $450,000.

Some people I have talked with believe homes prices may come down more. We don’t see that in Contra Costa County. And essentially with interest rates going up the affordability factor decreases regardless of home prices.

About Linda Urbick Linda

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Filed under: Mortgage Data

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