Interest rates have been surprisingly low for such a long time, no one really thought they would go up. Well, they did, and everyone was caught off guard.
In fact, at the end of December, mortgage interest rates increased to 5%. and slighly higher. A surprise to most people involved with real estate!
The Good News is that they have dropped back down to 4.75% in the past week. However, prior to the increase they were in the 4.25% range. That is still a half percent difference. That difference in a .5% change in an interest rate would be approximately $41.00 per month for a mortgage in the amount of $275,000. In other words, the rate increase of .5%, increased a monthly mortgage payment by approx $41.00 per month this past month for buyers searching for a home.
That $41.00 per month change equates into an appox $7,000 change in mortgage borrowing ability. In other words, in order to keep the mortgage payment equal to what is was at 4.25%, a buyer would have to reduce the amount borrowed by $7,000 and reduce their price range by $7,000.
Yes, mortgage interest rates do have a tremendous affect in home affordability, whether you are looking to purchase a home in Iselin, New Jersey, Colonia, Edison, in Middlesex County or any other State. With mortgage rates still at historically low levels, the important question is when will they increase and by how much!
Planning on buying a home in 2011? Take advantage of mortgage rates now before you start finding that they are in the 5% plus range! Why risk higher mortgage payments or lowering your price range due to increased mortgage interest rates?
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