How Investors Can Use Predicted Interest Rate Increase to their Advantage

By Heather Taylor0 Comments

Interest rates are projected to increase in the coming years, which could lead to higher mortgage payments for homeowners. A new Zillow research report outlines how a 1-percentage point increase in mortgage interest rates could affect mortgage payments in different parts of the country in relatable terms.

After accounting for expected increases in home values over the next year, in addition to higher mortgage rates, home buyers in San Jose in mid-2015 can expect mortgage payments to be $710 more per month than a comparable purchase in mid-2014 – about 5 nights in a hotel, more than 13 tanks of gas, 42 large Domino’s pepperoni pizzas or 195 Starbucks Grand Lattes. At the other extreme, new home buyers in the St. Louis area can expect to pay an extra $65 per month after accounting for both higher interest rates and different bottom-line prices – roughly equal to 1.2 tanks of gas, 4 large Domino’s pizzas or 18 Starbucks Grand Lattes.

Mortgage rates have been rising since bottoming out in December 2012, the Zillow report pointed out, also stating that recent trends point to the likelihood of continued increases.