SPRINGFIELD, MA (WGGB/WSHM) – Average mortgage rates have climbed to over seven percent this week, which is the highest in decades.
“With interest rate hikes continuing, that means it’s going to become less and less affordable and out of reach for people to be able to buy homes here in the Pioneer Valley,” said Kevin Sears with Sears Real Estate.
On Friday, Sears discussed climbing mortgage rates, which are now over seven percent, which is the highest since 2002. That is adding to the current challenge of limited housing available and brewing the perfect storm for buyers and realtors, so what does this mean for anyone eyeing a for sale sign on their dream home?
“What happens for a typical relator in the Pioneer Valley is their buyers their clients have a set budget, the price they can afford dictates the budget,” Sears added.
Sears breaks down the numbers, so you don’t have to. If you have a 30-year fixed rate mortgage for a $300,000, with 6.5 percent interest, you’re looking at nearly $1,900 a month for a payment. If you’re paying seven percent, the payment is closer to $2,000 a month. With every half percent the rate goes up, it’s an extra hundred dollars tacked on.
“With interest rate hikes continuing, that means it’s going to become less and less affordable and out of reach for people to be able to buy homes here in the Pioneer Valley,” Sears explained.
We also caught up with AIC Economics Professor John Rogers, who explained we have seen mortgage rates like this before.
“Before the Great Recession, in 2008, that was rather normal to have interest rates in the six, seven percent range. We have been living in a period since then, because of Federal Reserve policy and the general economic conditions, rates where interest rates have been kept artificially low, so we’re probably going back to normal,” Rogers noted.
However, he said that doesn’t make it any easier.
“A year and a half ago, you can get a mortgage at under three percent. Now, you’re talking about seven percent,” Rogers added.
He shared some advice when it comes to mortgages right now. To help with the interest rate, new homeowners should have the biggest down payment as possible, have a good credit score, and have a steady job. If you already have a mortgage, he said now isn’t the time to reconsider financing:
“In all likelihood, the rate you have now is a lot lower than the rate you would get,” Rogers said.
We asked Rogers when we might see two to three percent interest rates again. He told us it can be a long time due to factors like our tight labor market and supply chain issues.
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