Redfin, the Seattle-based, technology-powered real estate brokerage firm is reporting that a homebuyer would lose $23,250 in spending power with a mortgage rate of 3.25% versus a 2.75% rate, where they were sitting earlier this year. The average mortgage rate hit 3.02% in the week ending March 4 — the first time it has risen above 3% in seven months — and is likely to continue to increase, at least slightly, as the economy recovers. Redfins says that as an example, at a 3.25% interest rate, a homebuyer can afford a $506,000 home for $2,500 per month. This is down from the $529,250 they could afford on the same budget with a 2.75% rate. To put it another way, the monthly payment on a $506,000 home would rise $110 with the higher mortgage rate, from $2,390 to $2,500. Redfin notes that growth in the number of homes that have gone under contract has started to slow in recent weeks but said it’s too early to tell whether the trend is a result of winter storms, a shortage of homes for sale, rising mortgage rates, or whether the trend is likely to continue into spring or not.
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Homebuyers on a $2,500 Monthly Budget Stand to Lose $23,250 in Spending Power as Mortgage Rates Rise from Record Lows