How Do Interests Rates Affect My Clients’ Buying Power?

Guest post by Maureen Gilbert

We all know the Fed raised rates this week and while this, contrary to popular belief, doesn’t directly impact mortgage rates it does bring up an interesting question for your clients – how do rate increases impact buying power?

I’ll use two examples.  Here is what happens to a mortgage payment as rates rise:

Mortgage payment chart

But another way to look at is, if my client is pre-qualified at a certain amount, how does that decrease as rates go up:

Prequalified buyer mortgage payment chart

An easy rule of thumb is for every .5% (1/2 percent) increase your purchasing power goes down by 4-5% (percentage smaller for lower amounts but keep it simple, right?).

Maureen Gilbert is a CA & WA Loan Organizer | NMLS: 1382506

And remember, if you have any questions regarding the Bainbridge Island Real Estate market please contact us at any time. We’d be happy to speak with you!

Chris Miller: 206-780-6146
Bill Barrow: 206-780-6125

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