ARKANSAS, USA — Trying to build or purchase a home in Northwest Arkansas or the River Valley is a challenge. The interest rate hike announced by the Federal Reserve yesterday, it’s making things more expensive than ever.
The increase may seem small – just 0.75% - but it is the single greatest increase in nearly 30 years and has ramifications.
As interest rates go up, so do mortgage rates. Currently, rates are hovering right around 6%, just about double the percentage people saw last year. This means more strain on your finances.
“If you were looking at that rate before, of, for example, 3% and now you’re looking at a rate of 6.5%, your monthly payment has gone up significantly,” says Jeff Beauchamp, a real-estate agent for Sagely & Edwards Realtors in Fort Smith. “For some people, that put’s it out of reach.”
To put this into perspective, take a look at this example: If you were looking to buy a $250,000 home, your mortgage would have been around $1,500 at the start of the year. Now, you would be looking at almost $2,000. The mortgage rate increase is costing people a few hundred dollars more each month.
In Washington D.C., the Federal Reserve says the reasoning for the interest rate increase – which is impacting many other rates – is due to one thing, inflation. However, they say the rate hike is necessary to drive inflation down.
“We’re strongly committed to bringing inflation back down and we’re moving expeditiously to do so,” said Jerome Powell, Federal Reserve Chairman.
All of this sounds like bad news, but here at home, Beauchamp says the housing market continues to thrive, despite the rate increase. He believes now could still be the best time to buy, even with the most recent increase.
“Listening to some of the experts, there are many that think the rates could go to double-digits by the end of the year, first of next year. If that’s the case, you’re going to look back on this and think, maybe 6.5%, 7%, was a better value than I realized,” said Beauchamp.
Regardless of your current position on purchasing a new home, Beauchamp advocates building a strong relationship with your bank or lender to find the best option financially.
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