In August 2011, the Federal Reserve pledged to keep rates at historic lows through the first half of 2013. While this move signals that the Fed is focused on sparking economic growth, there’s no guarantee that mortgage rates won’t creep up on their own. In fact, the Mortgage Bankers Association says rates on 30-year fixed mortgages could actually increase from current historic lows of 4% to around 4.9% by 2013.
This means in a few short months today’s low mortgage rates could very well be fond memories. As you well know, an interest rate increase of just 1% can mean hundreds of dollars more in monthly mortgage payments. For example, an increase from 4 percent to 5 percent on a $400,000 loan would increase your payment by $237 a month.
See for yourself: play with our mortgage calculator to see how higher rates can affect your payment.
So if you’re not sure about buying a home now, keep in mind that you could buy significantly more house today than you may be able to in a year or two.
But don’t just take my word for it; consider what the Wall Street Journal has to say in Why It’s Time to Buy. Don’t have time to read the whole article? Here are some key takeaways:
- For now, you can deduct mortgage interest from your income tax — a big perk if you’re in a higher tax bracket.
- According to Freddie Mac, mortgage rates are near 50-year lows, making homes more affordable than ever.
- According to Moody’s Analytics, the ratio of home prices-to-income is 20.9 percent lower than the 15-year average through 2010 and 12.5 percent lower than the 1989–2004 average.
- The number of new households per year is going to make the market rebound in the coming years. “Whatever the excess housing supply is, it is shrinking pretty fast,” says Thomas Lawler, an independent housing economist.
- Mortgage financing is plentiful for borrowers with good credit scores and solid employment histories.
Doug C. Yearley, Toll Brothers Chief Executive Officer, summed it up when he said “…some of our customers, after waiting so long, are starting to move off the fence and into the market, motivated by attractive pricing, low interest rates, and most important, the desire to take the next step in their lives. The family with the elementary-school kids and a puppy when the housing debacle began five years ago now has middle-school kids and the dog that weighs 80 pounds.”
If you’re ready to start discussing your home buying options, feel free to contact a Toll Brothers Sales Representative by visiting TollBrothers.com.