The double whammy of rising interest rates and increased home prices has created a precarious situation for many Americans searching for a new home. According to a recent analysis by Fitch Ratings, the average millennial homebuyer in the U.S. lost about 9 percent in mortgage capacity between early October and last month, all else being equal. The average interest rate on a 30-year fixed-rate mortgage has increased sharply in the past few months, peaking at a rate of 4.32 percent in late December, up from 3.54 percent in early November, according to Freddie Mac. While there have been some decline in the short term, rates have stayed above 4 percent so far this year, averaging 4.17 percent last week. A borrower whose maximum loan amount was the median $120,000 when rates were at 3.42 percent in early October would have watched that same loan fall to $109,000 at 4.2 percent interest, all else being equal, according to Fitch. This not only complicates the situation for the buyer, but ultimately will create issues for sellers as well as rates continue to rise.
What this means in layman's terms for most homebuyers is that the loan amount they can qualify for becomes lower, and/or the monthly amount they pay for a that loan will be higher. Simply put, if you are considering a home purchase in the near future, there is no better time than now. Shoot me an email or text or give me a call and we can discuss your particular situation.