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Mortgage Rates Up This Past Week; How Will That Affect Solano County Home Buyers?

April 8th, 2010 categories: Loans / Financing

Interest Rates Going UpIn the first week since the government officially exited the mortgage assistance business, interest rates have started to rise, as many experts predicted would happen.

Highest Rates In 8 Months

Freddie Mac released its weekly mortgage market survey earlier today (see the left sidebar) , which shows that the average 30-year mortgage is 1/8% higher today than it was a week ago (5.21% this week vs. 5.08%) and the highest its been since the middle of last August.

Now the big unknown is whether this is the start of a continued climb to even higher rates or just the market correction that everyone expected would occur as soon as the federal government stopped buying mortgage-backed securities.

How Rate Increases Will Affect Local Home Buyers

If you’re in the market to buy a home in Solano County right now, you’re probably wondering just how much a rise in interest rates will impact your buying power.

Well, the answer depends partially on how much you’re borrowing, for the greater the loan amount, the greater the difference.

On a $200,000 loan, if you start out at 5%, for every quarter-percent increase in the interest rate, your payments will go up about $30/mo. On a $300,000 loan, it’s about an extra $45/mo.

So if you’re borrowing $200,000 and rates go up to 5.5%, your payment is going to jump about $60/mo. Borrow $300k and you’re looking at about $90 more every month.

A Rate Jump Could Mean Less Buying Power

That’s all well and good as long as you can still qualify for a payment that high. But if you’re only qualified to borrow $200,000 at 5%, then your buying power would drop by about $5,000 for every 1/4-percent rate increase in the rate.

So if rates went from 5% to 5.5%, instead of being able to borrow $200,000, you’d only be able to borrow about $190,000.

And on a $300,000 loan, going from 5% to 5.5%, your buying power would drop from $300,000 to about $283,000.

One last note: the box on the left sidebar with Freddie Mac’s weekly mortgage survey results is a national average. Interest rates locally can vary somewhat, so it’s best to check in with your mortgage lender to get the most current local rates, especially since interest rates for many loan programs are now very credit score driven.

If you’re just starting out or don’t have a lender, feel free to contact us and we’ll be happy to recommend a reputable local lender. To search for homes in Solano County direct from our own MLS feed, be sure to visit our Home Search page and contact us for further details on any homes that interest you.

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This entry was posted on Thursday, April 8th, 2010 at 3:42 pm and is filed under Loans / Financing. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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