How interest rate hike can impact Boston condos for sale
Hikes in mortgage interest rates could mean less home for the same mortgage payment for Boston downtown condo buyers.
Interest rates in the U.S. continue to rise. And if mortgage interest rates climb to 5 percent, as some forecasters expect, the price of a Boston condo for sale that a typical buyer in Boston could reasonably afford would fall by 9 percent, according to a new analysis from real estate website Zillow.
Zillow bases its estimates on a monthly mortgage payment representing 30 percent of a home-buyer’s salary.
The Mortgage Bankers Association predicts the interest rate for the average 30-year, fixed-rate mortgage will increase to 5 percent during the second half of 2019, and to 5.1 percent in the following two years. This means Zillow’s forecast regarding the effects of a 5 percent interest rate will almost certainly materialize in 2019.
However, it’s “important to remember that rates on a typical mortgage remain very low by historic standards — especially given the type of strong economic growth we’ve been experiencing,” Aaron
Recent hikes in mortgage interest rates have deterred some would-be buyers; surpassing the 5 percent mark likely would further dampen the enthusiasm of some potential homeowners.
If a 5 percent mortgage rate becomes a reality, “many homebuyers in 2019 will need to reset their price points, with some making concessions about where they’re willing to live or how much space they want,” Zillow says. “Buyers being pushed toward less expensive segments of the market where inventory is also the tightest could, in turn, push prices more quickly upward, making those homes less affordable.”