We have been spoiled with mortgage rates over the last few years as we saw the the 30 Year Fixed Rate get to the 2.50% range. As we move forward in 2022, mortgage rates have already started to climb. Rates are in the 4.00% to 4.25% range and we now have to adjust our purchasing power. Each half of a percent (.50%) in mortgage rate equates to about $25,000 of buying power. Depending upon when you were “Pre-Approved” for a mortgage, the new rates may greatly affect the home you now qualify for.
What should you do? Call your Lender or Bank and have your “Pre-Approval” updated to reflect the current mortgage rate of today. This will bring your purchase price and loan amount down as these higher rates will increase the overall cost of your mortgage payment.
Why is this happening? When the Fed raises the federal funds target rate, the goal is to increase the cost of credit throughout the economy. Higher interest rates make loans more expensive for both businesses and consumers, and everyone ends up spending more on interest payments.
Those who can’t or don’t want to afford the higher payments postpone projects that involve financing. It simultaneously encourages people to save money to earn higher interest payments. This reduces the supply of money in circulation, which tends to lower inflation and moderate economic activity—a.k.a. cool off the economy.
Economists have been warning us for the last few years, mortgage rates have to go up! The longer you wait, the more it will cost to buy a home. Or another way to look at this, you buying power could drop by 10% or more for each 1% increase in mortgage rate. Buy now while the mortgage rates are still low as we may not see these rates again in our lifetime!!
For more information on Mortgage Rates and Programs, feel free to call or email me anytime.
(C) 978-273-3227 or Bill’s Email
Senior Loan Officer | NMLS #4194 | firstname.lastname@example.org