Rate Increases Will Cost Homebuyers More Money

Everyone knows that the real estate market has been completely bananas in the last year or so. But I recently had a client who got his contract accepted in early March, and his lender didn’t lock his rate until earlier this month, right before closing. It cost my client BIG. The original rate he was quoted was 3.75%. By the time he locked, it had jumped to 5.375%. Huge difference in his payment (about $300) and the interest he will pay over the life of the loan.

The rate on an average 30-year mortgage has jumped from 3.11% at the end of last year to 5% and over—the highest rate in over a decade. Usually when rates start increasing, prices start stabilizing. Not so in this crazy market. Prices are continuing to increase by the minute.

Zillow did an example which lays it all out for us. Say your typical home value in March was $337,560. With a 20% down payment and a 30-year fixed rate, homeowners would pay around $1,316 per month, compared to $1,167 at the beginning of the year when the same house cost $327,102 and rates were lower. That's a $50,000 difference. Mind boggling!

It’s tough out there for buyers. Inventory is still super low, and that makes prices increase also. If you are thinking about waiting until prices get “normal” again, you may be costing yourself money.