PHOENIX — The Federal Reserve recently raised interest rates, but home mortgage rates have been rising faster and higher since the beginning of the year.
After years of rock-bottom interest rates due to the pandemic, the Federal Reserve is now trying to reign in an economy flush with cash and lacking in supply, especially in the housing market.
Higher mortgage rates mean you will pay more over the life of the loan, and that means paying a higher monthly payment, according to Senior Mortgage Advisor Kelly Zitlow of Keller Mortgage in Scottsdale.
“Just depending on your price point and your home loan amount, it’s going to cost a couple of hundred dollars more per month,” Zitlow said.
Zitlow said fewer people are applying for mortgages as mortgage rates rise, but she advises against that reaction.
“Right now we've all just been spoiled with and benefitted from these really, really low-interest rates, and it's been a great run. But the reality is an interest rate in the fours or even in the fives is still - if you look back historically - still great rates,” Zitlow said. “When the pandemic hit we saw interest rates plummet and they have been low now for the last couple of years. Well, that can’t be sustained.”
Zitlow says every situation is different and that any prospective home buyer should have a conversation with an experienced lender to see what is truly possible, as opposed to being scared off by news reports of higher rates. She also counseled against waiting for rates to come down to buy, citing a lack of housing stock in the market as demand remains high.
“Because of the housing shortage, we can expect that there will be an appreciation of – let’s call it conservatively – ten percent. So that $500,000 house is going to cost $550,000 in two years,” Zitlow said, speaking hypothetically. “Interest rates come down but now that house is 10, 20, 30% more expensive.”