SHOULD I BUY NOW BEFORE INTEREST RATES GO UP?
INDUSTRY NEWS, SHASTA COUNTY, TIPS FOR BUYERS
August 8th, 2008
When I first started selling homes in 1983, interest rates for 30-year mortgages were hovering around 18%. Adjustable rate loans were available with initial interest rates of 12%. I never thought mortgage rates would drop below 10%. 
By the late 1980’s they dropped below 10% and continued to drop until my clients were taking out loans with interest rates as low as 5.5%! That’s what my parents paid on a loan in the early 1960’s!
Today, interest rates are bouncing between 6-7% for a conventional 30-year fixed rate loan. Still a bargain in my opinion, but they are predicted to reach or eclipse 7% by years end. Buyers planning to purchase in the next few months should consider asking their lender to lock the rate during the escrow period. This allows the buyer to anticipate what their monthly payment will be. Some lenders will lock the interest rate at no charge while others will charge a fee usually in the form of a 1/4 to 1/2 point added to the upfront loan fees paid at closing. One drawback, however unlikely, is interest rates could go down and you might get stuck paying the higher “locked” rate. Most lenders will work with you and may drop the rate slightly or even offer the lower rate. After all, you could take your business elsewhere if there is a significant cost savings in question.
The reason interest rates are expected to climb is investors that buy mortgage-backed securities are demanding higher rates to purchase bonds. A 1% increase in mortgage rates on a typical $294,000 mortgage will increase the payment $200 or $2400/year or $73,000 over the life of the loan. Consumers have been focused squarely on home prices when they should really be paying attention to the impact even a small increase in interest rates can have by adding many thousands to the total cost of buying a home.
Factor in the tax benefits of home-ownership and waiting may cost much more in the long run than buying today. My buyers this year predominantly fall into two categories: firt-time buyers taking advantage of downpayment assistance and FHA loans, and wealthy investors, scooping up bargains while others are asleep at the wheel. Seasoned real estate investors know the market will recover and the best deals happen when others are looking at the glass as being half empty. Unless you feel our state and country’s population is in a nosedive, demand will return and prices will rise eventually, IMO!
If I can be of assistance in any real estate matter, please don’t hesitate to contact me. I offer free market evaluations, professional referrals and expert buyer representation.I always respond quickly!
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER
REAL ESTATE PROFESSIONALS GMAC
25 YEARS LOCAL REAL ESTATE EXPERIENCE
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