Real Estate: Interest Rates are on the Rise

By JESS BARRON, Lindsey’s Inc. Realtors

There is a growing concern in the real estate community regarding rising interest rates, which mortgage rates typically follow. Many potential buyers have been waiting for the real estate market to cool and prices to lower before they purchase a home. That does not seem to be happening anytime soon. 

As interest rates rise, many buyers will not be able to afford purchasing a home and will be priced out of the current market. Increased inflation is a driving force for the interest rates to be raised by the Federal Reserve. According to Bloomberg, in January of 2021, the year over year inflation rate for the United States was 7%. As of January 26th, 2022, mortgage rates are pushing 4%. This may not seem like a high rate, but mortgage rates were as low as 2.68% just 13 months ago, according to Rocket Mortgage. The rates have steadily increased since December 2020. 

This example, from Rocket Mortgage, of a one percent increase in a mortgage rate shows you the difference a percentage can make. This will prevent many “fringe buyers” from purchasing: By way of example, say that Taylor, a 30-year-old woman who is a first-time home buyer, wishes to obtain a 30-year fixed FHA loan on a new home with a 20% down payment. Below, you can get a sense of just how much she stands to save, given a 1% difference in interest savings on her 30-year mortgage.

30-Year Fixed Mortgage 

Rate             Monthly Payment*        Principal And Interest

[2.99%]                 $1,073                                             $842

[3.99%]                 $1,184                                             $953

On January 26, 2022, the Federal Reserve, the central bank of the United States, strongly hinted at raising the interest rates. The Reserve said with inflation rates well above two percent, it could start raising interest rates as early as March of this year. Many experts believe this is the first of several rate increases this year. This will cause mortgage rates to rise. With increasing home value and prices, as well as rising mortgage rates, purchasing a home will become more difficult. 

Now is a good time to buy before the rates and prices rise any higher. We are also seeing a large increase in the supply of listings here in Coweta County. We are at the very start of our listing season. It is a good time to start looking at property if you are not already. 

Jess Barron is an Associate Broker with Lindseys, Inc. Realtors and former President of the Newnan-Coweta Board of Realtors.