Sandbridge Real Estate Net

The Fed Announcement: What It Means for Mortgage Rates and the Housing Market

The Federal Open Market Committee announced on September 17, 2015 that the benchmark interest rate for short-term lending will remain at its current level of 0-.25 percent. U.S. interests rates remain at historically low levels, even though 2015 was supposedly the year they were going to rise. That being said, in the next couple of months rates will eventual slow start to climb.

“The federal funds rate, and in turn mortgage rates, remain low and will likely end the year roughly where they started it. For most markets and buyers around the country, the effects of any eventual interest rate hikes should be pretty small in the near term, but in some unaffordable markets where buyers are already stretching their finances, higher interest payments could more dramatically limit buyers’ options,” said Zillow Chief Economist Svenja Gudell.

In some markets, the higher interest rates could have a big effect on buyers and limit their options. These markets are big cities such as San Francisco and NYC, where housing is expensive. Other markets such as Cleveland, where home values are lower, higher rates will have very little impact.

For example, below is a chart to help you see how monthly mortgage payments would be affected if the rates rose to 4, and 5 percent. These calculations are assuming a $20,000 down payment.

        Monthly Mortgage Payment

As you can see in above, the higher the purchase price, the greater the impact a rate increase will have.

This is good news for the housing market, as the majority of markets around the country will not see much of an impact from a percent or two change in interest rates.

Full article from Zillow – http://www.zillow.com/blog/fed-announcement-mortgage-rates-183838/

This entry was posted on Tuesday, September 22nd, 2015 at 8:00 am and is filed under Buyers. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.