Interest rates are on the rise—it may be slow and steady, but they are going up. There is a lot of speculation as to how the increases will affect the housing market. Historically, interest rates for 30-year fixed rate mortgages have been as high as 18.63% in 1981 and as low as 3.31% in 2012. Since mortgage interest rates have been tracked, on average they have tended to fall between 7% and 9%. Since the peak back in 1981, fixed mortgage interest rates have, for the most part, followed a slow decline pattern.
Buyers
Buyers are the ones who seem to be most worried about mortgage rate increases as it means homes will cost more. For someone purchasing a $200,000 home with 20% down, a 1% increase in the interest rate will raise the monthly mortgage payment by about $100. Over the life of the 30-year mortgage it will result in an additional $30,000 in interest payments.
Although many buyers feel rates are getting to high, it is important to remember interest rates historically have been much higher—and people have always bought homes. If you are worried about the increasing rates, buy sooner rather than later and lock in your interest rate as early as possible.
Sellers
2019 will still probably remain a seller’s market, but inventory will increase. The hesitation by buyers due to higher interest rates could mean more homes on the market for longer periods of time. It will be important to price homes correctly to sell quickly. Sellers are encouraged need to put more effort into fixing up their home before putting it on the market to make it more attractive to prospective buyers.
Higher-priced homes may be harder to sell than low to mid-priced homes. The increase in interest rates makes the pricier homes even more expensive.
Overall, the rise in interest rates at this point is something to keep in consideration if you are buyer or selling a home, but the rates will still remain reasonable.