The Wall Street Journal has an interesting article today entitled: Rise in rates is a headwind for housing. The article noted that the national average rate has jumped to more than 5% and only three months ago it was at 4.17%.
How does this impact Boston condo buyers? A general rule of thumb holds that for every one-percentage-point increase in mortgage interest rates raises home costs for buyers by about 10%.
If you’re a Boston condo buyer and you locked in on a rate at 4.5%, you would typically need an income of $84,000, assuming 10% down to qualify for a $400,000 30 year fixed-rate note. If the rate jumps to 5.5%, the income requirement for the same loan would rise to $92,000.00.
One last point of interest, according to the Journal mortgage applications to purchase homes has fallen 12% in two months as rates have surged.