The real estate market is in full swing with more and more homes coming on the market every week. The only downfall here for Buyers is that the mortgage rates are also going up more and more each day. According to MarketWatch, rates haven’t been so high since August 2009. People wanting to buy a home are wondering if they should put their searches on hold. Here are 2 things to keep in mind when making your decision. The question is: Should I buy a home when Interest Rates are going up?
Interest Rates Keep Going Up
Interest rates are going up consistently rising from the beginning of the year. In 2021, the average mortgage interest rate on a 30-year conventional loan was under 3%. Now they are past the 5.5% point. And since March of this year, they have gone up over 10%. This affects how much of a home a person can afford. When you pair this with inflation and the costs of goods and services rising, it’s no wonder whey some buyers are deciding to sit this one out.
Here are 2 Things to Consider before making your decision.
1. Your Personal Story vs. Interest Rates
Regardless of the current market, “stuff” happens. It may be your dream job needs you relocate to a new area. It’s also possible that you have rented for years and understand the loss you continue to have. It could be that the higher interest rate will still be less than your potential loss through renting. Here is a good article to read on 8 Good Reasons to Buy a Home from The Balance. Regardless of the reason, sometimes a move is just necessary and this should always be taken into consideration. Interest rates are going up and of concern but it does not override life changes.
2. Your Financial Story
It is very important to talk with a lender or financial advisor to find out if you are financially able to purchase. This may affect whether you buy or rent for one more year. It may be just what you need to get your finances in order and re-renter the market at another time. Keep in mind that rental prices are also increasing as demand goes up. Landlords can be more picky as to whom they rent their property to. According to this CNBC article, “You should also have enough monthly income to afford the mortgage payment, taxes and insurance, as well as extra monthly expenses like utilities.” And also see this article about additional Costs when Buying a Home. These are all important things to consider when you ask “Should I Buy a Home when interest rates are going up?”
Bottom Line
Buying a home is not just about taking advantage of lower mortgage interest rates. More times than not, it’s about making smart financial decisions and life changes. Setting a budget and sticking to it is useful in making sure you don’t pay too much for a new home. Work with a reputable lender to get this done. Based on your income and monthly expenses, they will be able to help you set a realistic budget.
As always, please reach out with questions and concerns.