What's Happening

US mortgage rates have increased three weeks in a row for the start of 2018 according to a recent KSL.com article. This increase is mainly due to investors’ expectations of fast economic growth and the need to limit inflation. James Wood, Ivory-Boyer Fellow at the Kem C. Gardner Policy Institute at the University of Utah, recently spoke at the 2018 Salt Lake Housing Forecast and predicted mortgage rates to increase to almost 5 percent by the year-end. If owning a home is on your to-do list for 2018, don’t wait. Even with a minimal increase in interest rates, that translates to real money out of your monthly budget, and compromises you’ll have to make when it comes to which home you buy and what options you can put into it.
mortgage rates

Current Conditions
As of January 29, 2018, rates on a 30-year, fixed-rate mortgage rose to 4.15 percent from 4.04 percent. While expected to rise, the current mortgage conditions are still low and favorable for homebuyers. Especially homebuyers in the Salt Lake County market, which is where Daybreak resides.
According to the Wells Fargo/National Home Builders Opportunity Index (HOI), a median income household could afford 65 percent of the homes sold during the third quarter of 2017. It may seem counter-intuitive that with prolonged housing price increases affordability is still favorable. Our current run of historically low interest rates has played a key role in maintaining affordability.
“If we can stay below 5 percent, then we’ll have another very good market again in 2018,” according to Wood. Rates below 5 percent would preserve favorable housing affordability for another year, he added.
Outlook for 2018
A one percentage point increase may not sound like much, but that translates into an additional $175 a month on a typical payment for a $295,000 home. Likewise, when rates go up, so do the requirements to qualify for a loan. If you chose to purchase a home for $250,000, and interest rates go up by just 1/4 of one percent (.25%), you will need to earn an additional three percent in income to qualify for the same $250,000 house! If you don’t expect your income to go up by 3%, then you must purchase a home priced 3% less.
What Would You Rather Pay For?
Using our example above, let’s consider the long-term cost of purchasing that $295,000 home under rates just 1% higher than today. $175 additional per month times 12 months = $2,100 per year. Over the lifetime of a typical 30-year mortgage, that 1% will cost you $63,000.00.
In example 2, you’d need to reduce your home purchase price by approximately $8,000 to account for the 3% difference. That means your budget goes from $250,000 to $242,000. Cutting $8,000 could easily equate to giving up a third bedroom, finished basement or 2-car garage.
It’s Not Too Late!
Though rates are expected to continue to rise in 2018, it’s not too late to purchase a beautiful new home and avoid the risks of increase. All you need to do is choose from our incredible selection of move-in ready homes or meet with a Daybreak builder. Putting your dream “under contract” will secure the current rate for the full term of your loan if you chose a move-in ready home that can close before rates increase again.

Model homes are open Monday-Saturday, 10-6.  Get directions to a Daybreak Information Center.