How Interest Rate Increases Effect Purchasing Power

Its not so much the price, as the Payment

The data and graph below illustrate the enormous net effect to the consumer of mortgage lending rates. In the first series, a fixed loan amount of $300,000 is graphed into an increasing rate from 4.25% to 6.00%. The payment rises from $1,476 per month to $1,799 per month. The second graph shows a fixed payment of $1,475 per month and graphs the declining loan amount to the rising interest rate. A $1,475 monthly payment services (p&i) a $246,062 mortgage at 6.0%.

This analysis points out that it is important for the consumer to understand the rate trend at any given time. It is reasonable to expect interest rates to continue to rise until the current trend either ceases or reverses.

An informed buyer should secure a purchase contract and lock in a rate that has a "float-down" mechanism to allow for a potential rate decrease, while protecting against any further increase.

CLICK ON GRAPH/DATA FOR EXPANDED VIEW