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Here’s The Skinny On How Rising Mortgage Interest Rates Affect Your Home Loan

Here’s The Skinny On How Rising Mortgage Interest Rates Affect Your Home Loan

Mortgage interest rates are on the rise in 2019. Rates in Eugene today are 4.41% for a 30-year fixed rate loan, but it’s not likely to stay there for long.

Buying a home in 2019 will be more expensive than it was in 2018, but there is some good news: The Fed raised rates in December and it predicted three more rate hikes in 2019, but it changed its mind, now forecasting two increases in mortgage interest rates for the coming year.

The Fed’s Influence on Mortgage Interest Rates

The Federal Reserve’s actions impact almost all financial transactions. That includes what you pay for gas, groceries, and retail. It also includes jobs and wages, and credit card rates, too.

Surprisingly though, its effect on mortgage rates is more indirect. Mortgage rates respond more to actual market forces and directly to the actions of bond investors. Sometimes mortgage rates go up when the Fed raises rates, but other times, rates can go down. In 2017, housing experts predicted rates would rise but despite three rate hikes that year by the central bank, mortgage interest rates remained steady throughout the year.

What Does All This Mean To You?

Fluctuations in interest rates have no effect on your wallet if you have a fixed rate mortgage. If you have an adjustable rate mortgage, you should expect a slight rise in your monthly mortgage payment.

If you’re in the market for a mortgage, it’s wise to keep your eye on interest rates. Every increase in mortgage interest rates before you lock into a rate will change your monthly mortgage payment. If you finance $100,00 for your home at a 5% interest rate, your monthly payment will be $537. If your interest rate is 5.25%, that monthly payment changes to $552. Not much on the monthly expense, but it does add up over the life of a 30-mortgage.

You can calculate your monthly mortgage payment here. You can plug in variables such as interest rate, down payment, and length of loan to give you an idea of how much your mortgage will cost.

The Bottom Line

Buying a home in 2019 is going to be more expensive than it was in 2018. The Mortgage Bankers Association predicts that the average mortgage interest rate for 2019 will hold at 5.1%.  That doesn’t mean that you’ll miss out on getting a great home this year, though.

Because mortgage rates rose in 2018, mortgage applications are down and banks may be more willing to work with home buyers to approve home loans. If your credit score isn’t quite where you and your bank want it, loosening guidelines may help you get into the home you want.

Lane County is still hovering around the two month mark for median housing inventory. That means if no other home come on the market within two months, there would be no homes to buy in that price range. For context, real estate experts consider six months of inventory as a healthy rate.

With softer loan guidelines and rising interest rates, a motivated buyer can work with a seller to get a great home with an affordable mortgage.

Your time is now. While rising rates will shut some out of the affordability market for a home, the more the mortgage interest rates increase, more potential buyers could miss out.

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