Interest Rates…Direction?

Where are Interest Rates Headed

So where are interest rates headed next? Obviously, no one really knows but with that said the smart money on every financial network is saying that have to head up this year.

The evidence:

  • An improving economy
  • Improving wages
  • Improving job growth
  • Statements from the Federal Reserve

and on and on…

Great Time To Buy a Home

 

Below Historical Averages

Well below the historical averages the current sentiment is that interest rates will rise in 2015 because of the improvements in the economy and the governments desire to raise rates now that the economy is moving in the right direction again. Interest rates were lowered in effort to simulate the economy and held down artificially by the government until that has become a reality! Now that things are moving…interest rates have to go up because they have been held down unnaturally for so long. The fact is “they have to go back up”!

So, armed with this knowledge if your planning a move “now is the time”. Look at the example below and you can see the effect of a higher rate.

Affect of a Change in Interest Rate

Interest Rate Senerio #1

Home Price $350,000.

20 % Down Payment  $70,000.

Financed $280,000.

Interest Rate 4.5%

Term 30 Years

Payment P&I $1,419.

 

Interest Rate Senerio #2

Home Price $350,000.

20 % Down Payment  $70,000.

Financed $280,000.

Interest Rate 5.5%

Term 30 Years

Payment P&I $1,590.

A 1 point change in the interest rate will cause a difference of $171.28 each month, that may not seem like much of a difference? Now…do the math, it is actually a 12% increase in your housing cost! And…over the life of the loan that interest rate increase just cost you $61,660 ….wow!

So when you look back up at the chart above…you may notice the bottom on the chart was in 2012 & 2013!

Interest RatesOkay…I get it…no one can predict this trend and timing the market can be a challenge. So be it! But if you end up with a 30 year mortgage at today’s interest rate which is so far below the historic average…how can you say it was a bad move!

I personally believe these are “all time”, “once in a very long time” low interest rates. If your moving up…it’s a no brainer, if your moving laterally…it’s a no brainer, if your moving down..it’s still better at these interest rates than higher interest rates! Find Your Next Home

For a quick over the phone discussion about mortgages contact our 1st choice loan officer Toby Harris at Movement Mortgage 757-729-5959 or email him at toby.harris@movementmortgage.com For mortgage information click here Movement Mortgage

 

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