Case in Point : We had a few dozen conversations with clients about interest rates during the quarter.They are summarized below:
Q: Where are interest rates now? How do they impact my mortgage payment? Where do you foresee them going in the near future?
A: Great questions! You’ve probably seen quite a few recent headlines about interest rates. Here is the critical information you need to know:
As of the date of this newsletter, interest rates on a 20% down, 30-year conventional mortgage with 720+ credit on an owner-occupied single-family purchase are 5.00%. This is an increase from 3.250% at the beginning of 2022.
As a rule of thumb, every 1.00% increase in interest rate is about 10% more in monthly mortgage payment. Thus, a monthly payment on a $500K mortgage at 4.00% is $2,387 vs. $2,108 at 3.00%, an increase of almost $280. Since interest rates have increased approximately 1.75% in 2022, monthly payments on a $500K mortgage have increased approximately $508/month. Obviously, this is a significant increase and buyers need to be aware.
We anticipate interest rates will remain steady or increase slightly in Q2 and beyond. It’s important to note that very few, if anyone, can accurately predict where rates are going in the short-term as interest rate volatility is at an all-time high, with rates moving as much as a quarter-point in a single day. Given volatility and the unpredictable nature of the market, we’re advising risk-averse clients to lock-in rates shortly after going under contract.
Contact us anytime you have a real estate-related decision – refi questions, property tax concerns, renovation ideas, etc.
We’re more than just Realtors, we’re real estate advisors.