Time is ticking: The Federal Open Market Committee is less than a week away from what most analysts predict will be a vote to raise the federal funds rate for the first time since June 2006. A federal funds rate increase would then prompt interest rates to move higher.
Just how big of an impact could it have to potential home shoppers’ wallets? Forbes.com cites an example of a 30-year fixed-rate mortgage with a 10 percent down payment on a $350,000 home at 4 percent will cost home purchasers about $1,503.86 per month plus taxes, home owner’s insurance and Private Mortgage Insurance. That same 30-year fixed-rate mortgage with a 4.5 percent interest rate will cost a home buyer $1,596.06 per month – an extra $92.20 per month or $33,191.54 over the 30-year life of a mortgage. If rates rise to 5 percent the costs will jump to an extra $184.40 per month and $66,383 over the 30 year life of the loan.
A new First American Financial report showed that interest rates would need to reach 5.1 percent before significantly influencing the volume of residential transactions.
Source: “What Will the Looming Fed Rate Hike Do to Housing?” HousingWire (Dec. 9, 2015) and “How Much House Will a Rate Hike Cost You?” Forbes (Nov. 8, 2015)