Meridian Idaho Home Buyers & Higher Interest Rates!
Yup, they’re already (gasp!) up to about 5% for 30-year fixed rate loans now!
Is that the end of the world?
If you’re concerned about rising interest rates, please allow me to put things in perspective.
Plainly stated, 5% mortgage rates are not the end of the world!
Some real estate “experts” would have us believe that our real estate market is in imminent danger of collapsing due to these higher interest rates.
During my 46 years in real estate, I’ve NEVER seen a real estate market collapse with interest rates anywhere near 5%.
In 1982, 21% rates were a big problem.
Today, 5% interest rates are little more than an annoyance.
During most of my real estate career, interest rates have varied between 8% to 12% and everyone survived.
Underlying our present concern about rates is the fact that a large segment of our population has never experienced realistic interest rates.
They think 3% rates are the new normal.
3% interest rates are NOT normal!
Fact is, those 3% interest rates were artificially created by The Fed to help the national economy recover from the 2008 financial collapse.
We’re now in a very strong, growing economy that’s causing the Fed to raise interest rates to avoid higher inflation.
Consider the difference, illustrated below, between a 4.5% loan vs. a 5% loan when purchasing a $300,000 home:
- $300,000 purchase price
- $60,000 down payment
- $240,000 loan (30-year, fixed rate)
- Principal/interest payment with 4.5% interest rate = $1,216.04
- Principal/interest payment with 5% interest rate = $1,288.37
- Principal/interest payment difference = $72.33
For the average $300,000 home buyer, that isn’t enough to make or break the budget.
Higher prices, caused by ongoing low listing inventory, and rising building costs, are far more of a threat to buyers than 5% interest rates.