"Mortgage rates have exploded across the country in the past 6 months," stated Jonathan McCall of San Antonio Home Buyers, a home buyers company based in the San Antonio metro area. "We have seen mortgage rate increases in the past but nothing of this magnitude. Virtually every major city in the country is experiencing the same problem of housing affordability. This has created a situation where numerous potential homebuyers in San Antonio can no longer afford to buy a home and they are back in the rental market."
What Are Interest Rates Right Now For Mortgages?
In early April 2022, the average rate on a 30-year fixed mortgage was 5.10% according to Bankrate.com. A shorter 15-year fixed mortgage has an average rate of 4.22%. A jumbo mortgage is a larger loan for properties priced at $500,000 or more. Currently, a 30-year jumbo mortgage has an average rate of 5.03%.
Why Are Mortgage Rates Rising?
The Federal Reserve raised its benchmark interest rate for the first time since 2018. This was done to reduce the rate of inflation in the country. The Federal Reserve has indicated that it will probably raise the benchmark interest rate a few more times in 2022.
The soaring rise in mortgage rates coincides with two other factors that are pricing first-time San Antonio home buyers out of the market. These factors are a low inventory of homes for sale and dramatic increases in home prices. The combination of all three factors has made the home buying a difficult and more expensive process. Every professional home buyers company in San Antonio is also facing fewer and fewer opportunities.
How Are Higher Mortgage Interest Rates Affecting Monthly Mortgage Payments?
There are two primary impacts when mortgage interest rates increase. First, higher interest rates translate into higher monthly mortgage payments. Second, higher interest rates will reduce the amount a home buyer can borrow because of the lender guidelines that limit how much income can be devoted to housing costs. Below are two simple examples of the increase in monthly mortgage payments with a 2% increase in the interest rate.
If a $300,000 house is purchased with a 10% down payment and a 4% mortgage for 30 years then the monthly principal and interest payment would be $1289. If the mortgage rate rises to 6% then the monthly payment would be $1618, an increase of $329 every month.
If a $400,000 house is purchased with a 10% down payment and a 4% mortgage for 30 years then the monthly principal and interest payment would be $1718. If the mortgage rate rises to 6% then the monthly payment would be $2158, an increase of $440 every month.
Is There An Affordability Crisis In San Antonio Housing?
Yes. As housing prices increase along with the cost of borrowing money to buy houses the result will be fewer people able to afford to buy a home. In addition, the nation's homebuilders have been unable to close the gap between the demand and supply for houses. It will require years, perhaps a decade or more, for housing supply to catch up with demand. Therefore first-time home buyers in San Antonio will remain renters for a longer period and some may never be able to purchase a house.
"San Antonio Home Buyers will continue to purchase all types of residential housing and repair and upgrade them to current standards. We will do our best to maintain the housing supply in San Antonio," stated Jonathan McCall.
