Mortgage Rates on the Rise: What Does It Mean?

financial advisor instructing clients

The end of May signaled the 15th week that interest rates have risen since the year began. Only 21 weeks into 2018, that’s a 71%increase. This marks the highest rate of interest increases since 1972 which is when Freddie Mac started tracking this data. With the country’s strong economic growth and rise in inflation, the Federal Reserve is expected to increase interest rates again in June.

Current Interest Rates

As of this writing, the interest rate on a 30-year fixed rate loan is around 4.5 %, depending on the type of mortgage and other factors. This paves the way for the country to see mortgages rates reach — or even exceed — 5% by the end of the year. If interest rates reach 5%, they would still be fairly low from a historical standpoint. However, it could make homeownership more challenging.

The Effects of Rising Interest Rates

While an interest rate of 5% might not seem like much, each time it increases, consumers — including potential homeowners or real estate investors — lose a bit more of their buying power. In fact, with an interest rate of 5% in effect on a home mortgage loan, the borrows can expect to spend an additional $800 per year on their mortgage payments.

There are Other Factors at Play Too

As if the rising interest rates aren’t enough to pressure would-be home buyers, there’s also the fact that home values themselves are rising and there is a shortage of affordable properties that are making it a challenge for buyers or investors who are searching for a home within their budget.

With so many financial decisions at stake when purchasing a home, you should never go through the process alone. As a full-service real estate and development consulting firm, Parker Group combines a wealth of experience and a range of comprehensive services with a personalized approach to help our clients reach their goals. Whether you want to sell your home, expand your investment portfolio, or purchase a property, Parker Group can help you make the right decision. We’re knowledgeable in commercial and residential real estate, as well as development and property management. Learn more about what we have to offer by contacting us today!

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