We have often advised buyers to look at the COST of
purchasing a house more than the PRICE of the home. Obviously, price is part of
the cost equation. The other piece, assuming you are not an all cash buyer, is
the mortgage rate. The mortgage rate to finance a purchase can have a dramatic
impact on the overall cost. Recently, there are more people talking about the
possibility that mortgage rates could begin to increase.
HSH.com studies
trends in mortgage rates. They explain:
“A better economic
climate almost always brings higher rates, and a lessening of the troubles in
Europe from massive central bank assistance adds to the movement of money from
safe havens to more risky assets, driving rates upward.”
Dan Green of The Daily Market Reports recently stated:
“The Fed sees growth
coming faster than originally expected. There’s suddenly less chance that the
Federal Reserve will intervene to help keep mortgage rates low. Absent Fed
intervention, mortgage rates are apt to rise and Wall Street is now betting
that the Fed has bowed out. With no stimulus, mortgage rates rise.”
Lawrence Yun, chief
economist for the National Assoc of Realtors, recently wrote:
“Mortgage rates will
be starting to rise. From the 3.9 to 4.0 percent average rate in the past five
months on a 30-year fixed mortgage, the new rates will soon be in the range of
4.3 to 4.6 percent.”
Yun explains his
logic here.
We do not attempt to
predict future interest rates. We leave that up to the experts in the field.
However, we want our readers to understand the potential impact on the cost of
purchasing a home if they do rise. Here is a simple table that shows, even if
the PRICE of a home softens, the COST of a home could increase.
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