In recent weeks mortgage rates have reversed their downward trend and are beginning to move higher. As the economy strengthens the Federal Reserve is looking to reduce the amount of stimulus they are adding to keep the economy growing. Our friend Dan Green at The Mortgage Reports has a good write-up on FED activity from today.
The Impact on Home Buyers
If you think about an interest rate it is the cost of your mortgage. The more it costs – the less you can have. As the interest rate goes up, the cost of the mortgage goes up with it, and the amount of house you can buy with your budget goes down.
Big rate:Small house. Small rate:Big house.
As rate climb a home buyer’s budget buys them less house because with higher interest rates come higher monthly payments. The only way to reduce a monthly mortgage payment is to buy a less expensive house with a smaller mortgage.
The Impact on Home Sellers
Those buyers who were in a position to purchase you house may have just been priced out because their interest rate increased and their monthly is now too high. That is the bad news. The good news is up the street the buyers who were bidding on a more expensive house just had the same thing happen and they are headed your way.
While the limited inventory may have moved the needle towards a seller’s market in some areas sellers should not be overconfident. Buyers are going to looking for value again as the cost of home-ownership rises with the interest rate.
Thinking of buying or selling a home? Call me! Lets talk about real estate in the Cincinnati area! 513.518.1140