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Mortgage Rates – How An Increase In Rates Affects Your Purchasing Power

I came across a great article that explains the effect of interest rates on your purchasing power so well, that I have to blog about it.  Now that inventories are decreasing and we are running into an April 30, 2010 deadline for tax credits, you have to read it if you have been on the fence about whether or not now is the right time to buy real estate.

The article, If You Don’t Buy a House Now, You’re Stupid or Broke may have an offensive title, but the graphs that it contains illustrate historic interest rates and increasing trends and the explanation on how an increase in rates affect what you will pay in principal in interest are easy to understand.  In a nutshell:

  • For 30+ years interest rates ranged from a low of 7% to a high of 18% (my husband and I were paying over 16% interest when we purchased our first home in the 1980’s)
  • Current interest rates are the lowest they have been in 40 years
  • For every quarter-point change in interest rates you will pay an additional $6,000 for every $100,000 borrowed over the life of a 30-year fixed rate  mortgage.