Chart: Home affordability and the impact of rising mortgage rates!

By | April 23, 2014

HAVE YOU EVER BEEN TO A CLOSING WHERE THE TITLE WASN’T CLEARED? WE HAVEN’T!

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The impact that an increase in mortgage rates has on real estate affordability, also known as purchasing power, is a concept extremely familiar to most prospective buyers who watch them on a daily basis until they are locked-in!

The chart below illustrates the point by showing how a 25 basis point increase in the mortgage rate for someone with a specific maximum monthly principal and interest payment in mind will impact the price of the house that they can afford.

In this case the desired ‘monthly nut’ is in the ballpark range of $2,044 and, as the mortgage rate increases from 4.50% to 5.50%, the price of the house that fits the payment criteria drops by $40,000.

home affordability,mortgage rates,buyer purchasing power

 

 

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