Interest Rates are Hiking! A Must Read If You Are Considering Buying or Selling Your Home

Interest Rates

There has been a lot of talk about rising interest rates in the last few months. But more than talk, we’ve actually seen an appreciable difference in rates from the start of the year until now.

As we approach 2019 some forecasters are predicting anywhere from 2 to 4 rate hikes. It's safe to say rates will eclipse 5% for the first time in a while.

DO NOT PANIC – despite rising interest rates bear in mind they are still historically low. Only 10 years ago they averaged 6% for 2008 so we are still in a good position. 

That being said we were speaking with one of our lending partners, Eric Stam over at Citizens Bank, and he was kind enough to provide a below breakdown of what your monthly loan costs might look like with a 0.5 increase in rates.

I thought it would be helpful for you to see this breakdown under 3 separate purchase scenarios and then compare it to the relative discount needed on purchase price.


Scenario 1

Purchase Price: $1,000,000

Loan Amount: $800,000

Monthly Mortgage Payments

4.50%: $4,000

5.00%: $4,300

This $300 difference equates to $65,000 in purchase price.


Scenario 2

Purchase Price: $2,000,000

Loan Amount: $1,600,000

Monthly Mortgage Payments

4.50%: $8,106

5.00%: $8,589

This $483 difference equates to $95,000 in purchase price.


Scenario 3 

Purchase Price: $5,000,000

Loan Amount: $3,500,000

Monthly Mortgage Payments

4.50%: $17,700

5.00%: $18,800

This $1,100 difference equates to $217,000 in purchase price.


It’s quite revealing that a half point increase in interest rates can lead to such a large dollar value.

For Buyers:

If you are on the fence about buying, take note that the relative softness in the market plus still low interest rates can equate to a very good opportunity to purchase now. Yes, prices may continue to fall but if interest rates rise, as indicated above, they may offset each other.

For Sellers:

As interest rates increase, buyers will expect the increase in costs to be reflected in the sales price. Therefore, if you are holding out for a better market – don’t. If the Fed does increase rates numerous times in 2019 it will only hurt your chances of getting better value for your home.

Please feel free to reach out to us for more insights into how interest rates will impact the market as we have modeled quite a few purchase prices and scenarios - and if you're wondering how much your home is really worth, you can use our FREE online home valuation tool

Please don’t hesitate to reach out to us if you want more tips and hints on the state of the market. We are constantly looking to bring you value and insights!