Low Interest Rates
The interest rate you lock when buying a home not only impacts your monthly housing costs, it also impacts your buying power.
Buying power is the amount of home you can afford to buy for the budget you have available to spend. As rates increase, the price of the house you can afford will decrease if you plan to stay within a certain monthly housing budget.
The chart below shows what impact rising interest rates would have if you planned to purchase a home within the national median price range, and planned to keep your principal and interest payments between $1,850-$1,900 a month.
Real Estate Bottom Line
With each quarter of a percent increase in interest rate, the value of the home you can afford decreases by 2.5% (in this example, $10,000). Experts predict mortgage rates will be closer to 5% by this time next year.