Interest Rates, So Hot Right Now
Act now or forever hold your peace, because interest rates are about to jump – and we may not see rates this low again for a while.
Interest rates have been next to nothing since 2008, but that’s about to change in the near future as financial experts predict that rates are on the cusp of a sharp increase. If you have (or plan on getting) a mortgage, this is going to affect you. Just a tiny tweak, like the quarter of a percent increase we’re expecting in the next few months, can have a massive impact on the total amount you’ll have to pay. For a mortgage, this seemingly small difference can change the amount you owe by potentially tens of thousands of dollars over the course of a 30 year loan.
However, the impact that this financial decision will have on property prices is still up in the air. Some feel that rising rates will lead to lower prices in order to compensate for the higher mortgage payments; others believe that rising rates are a sign of a healthy economy, which equals higher prices. But the fact is, historically, there has been no clear relationship between interest rates and property prices. Instead, as you can see in the chart below, there is a stronger relationship between property prices and our economy’s general health.
Higher interest rates mean higher loan payments when compared to total amount of the loan – not necessarily higher or lower property prices. Although it can be frustrating to have to pay more money for the same property, it’s actually a good sign that this is happening – our economy is recovering!
We can expect these rate changes to be a hot discussion topic for the next several months, so what we can do while we wait for the final outcome is make sure we’re prepared for an increase. The market is constantly changing, and it definitely pays to stay ahead of the game!
Real estate investing can be tricky, and the market can be volatile. Let Lyon Stahl help you make the most of your investments!