Impact of Low Interest Rates on Purchasing Power

High Impact of Low Interest Rates on Buyer’s Purchasing Power:

According to Freddie Mac’s latest Primary Mortgage Market Survey, interest rates for a 30-year fixed rate mortgage are currently at 3.96%. This is still near record lows in comparison to recent history! The interest rate you secure when buying a home doesn’t only greatly impacts your monthly housing costs. It also impacts your buyer purchasing power.

Purchasing Power:

Simply put, purchasing power is the amount of home you can afford to buy for the budget you have available to spend. As rates increase, the price of the house you can afford will decrease if you plan to stay within a certain monthly housing budget.

The chart below shows what impact rising interest rates would have if you planned to purchase a home within the national median price range. It also shows how to keep your principal and interest payments between $1,850-$1,900 a month.

With each quarter of a percent increase in interest rate, the value of the home you can afford decreases by 2.5% (in this example, $10,000). Experts predict that mortgage rates will be closer to 5% by this time next year.

Bottom Line:

Act now to get the most house for your hard-earned money. Research interest rates to take back your purchasing power.

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