On Wednesday, the Federal Reserve voted to raise the key interest rate one quarter of a percentage point. Three rate hikes are anticipated for 2017. This is the first. In December of 2016, the interest rate was also increased a quarter of a point. Federal Reserve only increased the interest rate twice in the preceding 10 years marking a major change in policy.
So – how does this affect people planning to purchase a home?
Many in the industry are concerned, thinking that this will make housing cost more expensive and less affordable. Others are not as worried. But many people will think they cannot afford to purchase a home. Others will think they will need to find a less expensive home.
So – let’s put things in perspective. Let’s say you were to take a $400,000 mortgage If the interest rate is 4.25% the monthly payment will be $1968. If we calculate the same amount at 4.5% the mortgage payment rises to $2026.