April 8, 2015 Ralph Ragette

Interest rates are in the news:  Projected to rise from their historically low levels as the Federal Reserve winds down Quantitative Easing.  Is this a major problem for the prospective buyer?  The Answer: “Probably Not.”

Obviously, buying a home sooner rather than later in a rising interest rate environment may be a good idea.  However, it is unlikely that changes in interest rates of the magnitude currently expected will have a controlling impact on the home purchase decision.

What do rising interest rates mean?  As of March, the 30 year mortgage interest rate was approximately 3.8 percent.  On a median priced $202,000 house, monthly payments would be approximately $1231 per month (P&I:  $847; Taxes:  $219; Insurance $75; PMI $90).[1]  A .5% interest rate increase to 4.3 percent would raise payments to $1,284.

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Rather than worrying about interest rates– over which they actually have little control outside of shopping around among lenders– potential home buyers need to focus on the availability of a mortgage money—typically regional and community banks and credit unions as well as national lenders–and staying within a reasonable budget.

Ralph Ragette

Ralph Ragette, Ragette Real Estate. Ralph is a 5th generation Realtor in Westchester County New York. His firm was started by his great-great grandfather in 1885.