For the past several weeks, mortgage rates have been some of the lowest they’ve been all year. But what does the future hold for interest rates, and how will that affect new South Bay buyers?
Just they did with 2014, economists predict that 2015 rates will go into the 5% range for 30-year fixed-rate mortgages. Right now, the average is somewhere in the 4.20% area, so that definitely means that some buyers would end up paying more for their loan for the same properties in the South Bay. For every 1% increase in your mortgage rate, a typical mortgage payment can go up as much as $700 in luxury areas such as ours. The less expensive the home, the less expensive the loan, and therefore, the less expensive the monthly payment will be. But here in the South Bay, it’s rare to see a nice home in a good school district list for under $1,000,000, and prices are not expected to drop anytime soon.
Even if interest rates were to go as high as, say, 7%, which they were in the early 2000s, most homes will remain relatively affordable for most buyers in the South Bay, but buyers will all have to make compromises on the properties of their dreams as costs go up. To potential borrowers worried about whether to buy now, or to buy later, because interest rates may not end up rising so much this next year, I want to say this: even if interest rates stay the same, home values will increase through 2015. Even if you end up with the same loan you would have gotten now, you will still be paying more because you will have to borrow more to cover the increase in home value appreciation on a home in one year. The best time to buy and borror, truly, is right now because whether they linger for a few months or even a whole year, eventually interest rates will go up and so will home values.
