America’s national mortgage interest rate varies by the fiscal quarter, but the average rate today is down to almost a third of what it was in 1985. The national average is currently 4.16%, which is a fraction of the 7.38% rate from the early 2000’s. That rate is rising and will most likely be at 5% by the second quarter of 2019.* So what does this mean for consumers in the new home building market?
What does interest have to do with purchasing your home? Every mortgage agreement has interest, meaning that every day that you do not reimburse the bank for their loan – the more money that you owe them due to interest. This raises the overall price of your home throughout the duration of your loan.
Why does a small difference in your interest rate mean that you should buy now? Because over a 30 year mortgage, interest will grow by the year. A half percent increase in the rate of a $250,000 mortgage would cost you $54,000 more at the end of your loan. Essentially this means that your home will cost you $50,000 more one year from now than it will purchasing at the current interest rate due to the predicted increases.
Although interest rates are increasing, homes are more affordable now than they have ever been. Many people are focused on their monthly payment more than the overall price of their home. With a $1,000 monthly payment today, you can afford a $60,000 more expensive home than you could in 2000.
Another crucial reason to buy now is that prices are steadily increasing. Home affordability has been strong since the recession, but since 2011 monthly payments on homes have been increasing. Homes are still very affordable even with increasing interest rates and increasing base prices. Call an Arbor Homes sales associate and visit one of our models to get your home buying process started!