“What’s the impact on purchasing power of a 1% increase in interest rates

All the focus in real estate has been focused on property values, which is definitely important. equally important is the interest rate you receive on your mortgage, but this receives dramatically less attention.

Here's a scenario to be closely considered. On a $300k home purchase, with 20% down, on a 30yr fixed mortgage you end up with $240k. With a 5.00% interest rate the principal and interest payment would be $1,288.37. To get a similar payment with a 6.00%, still assuming 20% down your purchase price would drop to just under $270k ($268,600 to be exact).

The answer to the initial question....an increase of 1% in interest rates equates to a home buyer looking at homes worth 10% less to achieve the same payment. With the threat of increasing inflation and an improving economy it's very likely that rates will be increasing. Now is the time to buy.

Interest Rates....

If the interest rate rises 1% how much does this cut your purchase power??