Last Christmas we had something not to be thankful for: the home mortgage interest rate for a fixed rate loan hit 4.1 percent, according to Bankrate. This is the highest rate we’ve seen in over three years.
What does this mean to home buyers and homeowners seeking to refinance? Here is the answer, in dollars and cents. If you are borrowing $200,000 to buy a home ( the median resale here in Las Vegas last month was $233,000, so that’s about right), and put 20 percent down, you would pay
$898 in principal and interest if the interest rate was 3.5 percent (the rate through early October.)
$954.83 in principal and interest if the rate was 4 percent
$1013.37 if the rate reaches4.5 percent
These numbers, of course, are not your house payment. You have to add in property taxes (about $1200 a year or another $100 per month) and your homeowner’s insurance.
Hey, 4.1 percent is not a bad rate. When I bought my first house in 1978, my mortgage rate was 18 percent….because I had perfect credit. Mortgages rates fell under 5 percent in May 2010. The last time they were below 5 percent before that was when Elvis first appeared on the Ed Sullivan Shew (as he said it) in the fall of 1956.
Why is this happening? Two reasons:
Inflation worries. President-elect Trump has said he will increase federal spending on infrastructure plus cut taxes. Both of those trigger inflation. That causes interest rates to go up.
The Trump dump. Wall Street bundles all your individual mortgages to create mortgage-backed bonds. Bonds prices shot up after the November 8 election because foreign investors, who are big mortgage bond buyers, have read “The Art of the Deal.” In that book Trump advocates my mother’s mantra of “never pay retail.” They worry he will try to negotiate the bond price and pay less than the face value. Whether any US president can do that, since bonds are backed by the US Treasury, is an open question. But stock and bond prices are often the product of psychology notreality and I suspect that’s what’s happening here.
What dos this mean to you?
If you are a home buyer, you’d better get something under contract before rates go higher. If you don’t, you will have to buy less house for the same money.
Call, text, email or send a note by carrier pigeon if you want to start shopping….
((hugs)) BETH Ellyn
THE Las Vegas Real Estate Concierge
State Managing Broker, Nevada
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