Mortgage Rates Continue to Rise

Last week I did a post highlighting the rise in interest rates over the course of the previous 5 days. Well the trend has continued. The rate which had gone up from 4.17%  to 4.51% in under five days is now up to 4.625%. The current rate includes one discount point (1% of the loan amount owed at closing, patient and I believe the previous rate included this as well).

Assuming a purchase price of $300, diagnosis 000, patient $3,000 a year in taxes, and a down payment of 20% the payment would increase $64.49/mo (using 4.17% as the baseline). This may not seem like a dramatic change, but it could be enough to potentially derail the purchase efforts for anyone trying to use their entire budget. Keep in mind also that with one discount point required for this rate, an additional $2,400 would be required at closing as well.

As another comparison, if your budget is $500,000 with $5,000 a year in taxes, and 20% down the increase in payment would be $107.48/mo. The discount point requirement for this loan would be an additional $4,000 at closing.

If, as a buyer, your previous qualification terms included a discount point, then the closing numbers are not going to change very much at all. However, it is entirely possible that there are folks who started their house hunting with a quote of 4% or less with no points. For them the change over the last couple weeks is pretty substantial. If you are someone who is in this position you should make a point a speaking with  your lender to determine your updated qualifications, and make sure you are all on the same page regarding if and when to lock your rate.

A note to sellers: This also means your house is that much more difficult to buy at the current price. Just food for thought, not saying you automatically need to consider adjusting your pricing strategy. After all, if affordability changes the whole buyer pool slips down a bit, so who knows, the buyer you have been waiting for may have been shopping just a hair above where you are listed, and now will give you consideration. Consult  your Realtor for guidance.

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