Thursday, October 6, 2022 / by Laura Larson
Effects of Increasing Mortgage Rates
Let's say you want to purchase a property for $400,000; the median price of a home in the United States is $389,500. Here is how your purchasing power may alter if mortgage rates rise if you're trying to shop at that price range while keeping your monthly payment at $2,500 to $2,600 or less.
You might need to look at homes at a different price range as your borrowing capacity falls as rates rise.
Will mortgage rates decrease?
Therefore, if you're expecting mortgage rates to decrease, you might have to wait for a while as the Federal Reserve attempts to contain inflation. Additionally, keep in mind that renting will become more expensive over time if you decide to do so as a temporary solution. According to the National Association of Realtors (NAR) Senior Economist and Director of Forecasting Nadia Evangelou: "There is no question that these higher rates reduce the availability of houses. However, in addition to rising borrowing costs, rents also grew at their fastest rate in almost 40 years."
In essence, it is accurate to say that the cost of purchasing a property has increased since last year, but renting has also increased. This implies that you will pay more in either case. The distinction is that homeownership also involves building equity over time, which will increase your net worth. Which makes more sense to you?