Can’t say I didn’t warn you…

Courtesy Bankrate.com

And Interest Rates Are On the Rise!

Several months ago I was warning buyers and sellers to make a move ASAP before interest rates move up. The ridiculously low interest rates that the Feds have kept artificially low to make the economy look better than it really is was a temporary subterfuge that must eventually give way to a substantial, if not dramatic, rise back to true market value. The difference a one point increase from 3.5% and 4.5% on a $100,000 mortgage is about $60/month or $720/year. A $300,000 mortgage, therefore, costs $180/month or $2,160/year more. If a buyer is on a fixed income, you can see how his purchasing power gets eroded quickly as rates rise. This means buyers cannot afford as an expensive a house as before – or even buy at all – and eventually home values also erode due to the law of supply and demand. The upside for sellers in a market of rising interest rates is the flurry of panic buying as buyers try to buy before rates get too high. The most opportune time for rates to rise is right after a presidential election where there’s a change in government or a change in government policies; and so, it is of little surprise that we are now seeing a hike in interest rates that I have previously warned everyone about. Those who heeded are happy. Those who did not, not so much…