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Navigating the Housing Market: Why a 2% Hike in Interest Rates Shouldn’t Deter Your Home Buying or Selling Plans

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Wednesday, 26th July 2023

The Prospect of a 2% Hike in Interest Rates

The prospect of a 2% hike in interest rates may appear daunting at first glance, especially when you’re considering buying or selling a home. However, when you take a long-term perspective and consider the potential appreciation of a home over 30 years, this short-term increase in cost can seem far less intimidating. The Carol Royse Team, an experienced group of real estate professionals, is here to guide you through this complex scenario and help you make an informed decision that suits your individual circumstances.

Let’s first understand the impact of a 2% interest rate hike on a 30-year mortgage. Suppose you’re looking at a $300,000 house with a 30-year fixed mortgage. At a 3% interest rate, your monthly payment would be approximately $1,264. If the interest rate were to rise by 2% to 5%, your monthly payment would increase to roughly $1,610. Over 30 years, the additional cost would be approximately $124,560.

Now, let’s consider home appreciation. According to historical trends, home prices have appreciated an average of about 3.4% per year nationally. Therefore, the $300,000 house you buy today could be worth around $811,000 in 30 years. This would give you an equity gain of over $511,000. When you compare this potential appreciation with the additional interest costs, you may find that buying a home still makes sense, despite higher interest rates.

The Current Property Market

The current property market conditions indicate rising prices. If you’re planning to buy a home, it might be tempting to wait and see if the rates will drop back down. However, the risk lies in property prices potentially continuing to climb, thereby making homes even more unaffordable. For example, if home prices were to rise by 3.4% annually, that $300,000 home would be worth around $324,000 in just a year’s time. So, even if the interest rates were to drop back down, you could still be paying more overall due to the increased cost of the home itself.

Here’s where the expertise of The Carol Royse Team comes into play. With their wide network and in-depth knowledge of the real estate market, they can help buyers navigate these challenging circumstances. One key strategy they can leverage is helping buyers buy down the interest rate with special lending programs.

Buying down an interest rate, or “points”, is when a borrower pays an upfront fee to reduce the interest rate on their mortgage. For example, one point typically costs 1% of the loan amount and reduces the rate by about 0.25%. By doing so, you could save tens of thousands of dollars over the life of the loan, which could potentially offset the increased costs of a higher interest rate.

The Carol Royse Team

The Carol Royse Team has access to special lending programs that offer these and other advantages. These programs may have certain requirements, but they can make a significant difference in the long run. In addition, the team can provide you with timely advice on market trends, helping you to make the right move at the right time. Their negotiation skills can also be instrumental in securing favorable terms on your behalf, ensuring that you get the best deal possible.

While a 2% interest rate hike might seem like a cause for concern, with the right planning and expert guidance, it should not deter you from your home buying or selling plans. In the long run, the potential appreciation of your home could far outweigh the additional costs incurred due to the increased interest rate. Trust The Carol Royse Team to help you navigate these uncertain waters and chart a course towards a rewarding and fruitful home ownership experience.

Looking for your perfect real estate match? Finding your dream agent is easy with Our team consist of top Real Estate agent to help you with any of your real estate needs! Call Carol Royse at 480-776-5231. Or feel free toshare our contact information with anyone you know that needs expert help in buying or selling their home.

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