Potential homebuyers likely have heard that mortgage rates are rising, and will continue to do so for the foreseeable future.
Still, homebuyers should not feel discouraged, as the higher rates have a limited impact on monthly mortgage payments.
The national average 30-year fixed rate mortgage was at 4.7 percent as of September 16, 2013. In contrast, rates hovered around historical lows at 3.9 percent at the beginning of June 2013.
This higher mortgage rate translates to about a $47 increase per monthly mortgage payment for a $100,000 property or $94 increase for a $200,000 property.
In other words, “Don’t panic,” says Rick Allen, chief financial officer at MortgageMarvel.com, a mortgage shopping website where consumers can compare rates and quotes. “The increase in interest rates is significant but not dramatic, and there’s still plenty of room for people to buy.”
The additional cost per month can be offset by purchasing a modestly lower cost home or changing monthly spending habits.
In fact, rates have been low for so long, Allen says, “Maybe it’s a good sign from an economic perspective, that the economy is coming around and people are feeling better.”
Rates are expected to continue to increase, Allen says, but not dramatically. Though fixed-rate mortgages are still attractive, he says that buyers are looking at adjustable rate mortgages as well. “It depends on the time they expect to spend in the property and … making sure, for consumers, it’s the best decision for them.”
Meanwhile, since both property values and interest rates are going up as a general trend, “It looks like homeownership is going to get more expensive over time. That makes it a good time to buy,” Allen says.
None of the current trends should cause buyers to overreact or be hasty in their decisions, Allen emphasizes. Mortgage comparison sites like Mortgagemarvel.com can help consumers to understand the difference between loan products and interest rates to make a smart choice, he says.
— Bettina Chang
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