Interest rate hikes!

It looks like rain, it smells like rain and I believe it will rain today or tonight! You know that old song about April showers that bring May flowers...it is true this year. April is not usually a wet month in Big Bear but it has been this year.

Everything I read says that interest rates will soon be rising. They have already gone up slightly and are expected to rise somewhere between one and one and a half percent by the end of the year. A 1% rate increase on a 30 year loan would increase the cost of the house by almost 17% over the life of the loan. That is a large increase! If you can possibly buy prior to the interest rate jump it would certainly be financially beneficial. It's not just extra interest you will pay each month but you will have to qualify for a larger payment which in some cases would be difficult for many buyers.

I have seen interest rates as high as 20% and as low as 2% in my career. However, most of the time it was 7 to 10%. So if it stays under 8% it looks good to me! It is going to climb, it is just a matter of when. The current interest rates are artificially low and they can't stay there. So expect the rise in interest rates and make your plans accordingly! My belief is that borrowing money to purchase a home or cabin is about the cheapest money you can get! Look at the interest rates that credit cards charge. 30 to 38% and people continue to use their credit cards...so why would they complain about mortgage interest? It's the same with auto loans. Their interest rate is usually much more than mortgage rates. So, if you look closely at the rates for homes even if they do go up it is the cheapest money you can buy!

Until next time, Bonnie