Even the slightest movement in mortgage rates can translate into more – or less – purchasing power for home buyers.
John Burns Real Estate Consulting recently looked at how the fluctuation in rates effects the average consumer. The firm found that a typical family earning $60,000 a year could afford around $1,800 month for the mortgage payment.
In 2000, a 30-year fixed-rate loan, which averaged an 8 percent mortgage rate, would have qualified that family for a $245,000 loan.
But at a 4 percent mortgage rate – which current rates are averaging – that same family can qualify for a $377,000 loan.
“In other words, each 1 percent drop in interest rates in the last 15 years has allowed home sellers to raise the price 12 percent,” according to Jon Burns analysis.
Source: “How Tiny Mortgage Rate Moves Can Buy You a Lot,” CNBC (March 10, 2015)