Interest Rates Are on the Move, Should You Be, too?
A leading story in economic news in the last two weeks has been the quick jump in interest rates of almost .05%, with two more hikes predicted in 2022. For buyers, a move of this magnitude can have a significant impact on their buying power. A rule of thumb is that for every 1% of change in the interest rate, a homebuyer's budget is decreased by 10%, so in two weeks, we saw buyer's budgets decreased by 5%. This is not insignificant, especially when prices are continuing to rise.
A natural question is whether or not this will cause prices to fall. Due to structural supply issues, this is highly unlikely. Also keep in mind that interest rates have been at historic lows during the pandemic; today's current rates put us only a little above interest rates in the first quarter of 2020.
For perspective:
Today's Rate: 3.65%
2021: 2.87%
2020: 3.47%
2019: 4.37%
If you are actively looking for a new home, check in regularly with your lender to see if the amount you can borrow changes. Unfortunately, you can't lock in your rate until you have a property under contract, so if you've been thinking about entering the market, don't wait. The sooner you can identify a property and lock in your interest rate, the better.
