Here’s an interesting article showing the huge effect that interest rates have on house prices.
Record low interest rates help to support high housing prices and higher rates reduce the amount of money that can be borrowed, all other things being equal.
When rates return to normal levels home prices will be depressed.
And when you see the impact record low rates have on purchase prices, you might be as concerned as I am.
I never thought I’d see the day when you could get a 30-year fixed rate loan at just 3.31 percent, but that was the case last week according to Freddie Mac’s weekly survey of mortgage lenders. While most people probably just shake their head at these astonishingly low numbers, it is homebuyers who are seeing the kind of impact they have on monthly mortgage payments and, as shown below, this effect is profound.
Based on a constant mortgage payment of $1,100 per month (what seemed to be a good national average based on this story and others like it), today’s 3.31 percent 30-year mortgage rate will finance a house at almost double the price that the 40-year average mortgage rate would!
Read the full article here.