Key Highlights:
– Don’t wait until its too late to get the lowest mortgage rates
– Mortgage rates are expected to rise 3 times throughout 2017
– Buyers lose 13% purchase price if interest rates rise by 1.5% 

In my years of working with clients, I come across a few reoccuring hesitations. Buyers are worried that interest rates seem high and have hopes that they will somehow decrease. Just like the stock market, interest rates do fluctuate. There is usually a cause and effect reason behind it. Right before the market crash in 2007, mortgage rates hit a high of 6.55%.  Mortgage rates also may increase or decrease depending on current events that are happening around the world which may affect the economy, but those fluctuations aren’t as large as when an economy crash or boom occurs.

Thankfully since then, our US economy has been improving and we’ve been seeing the housing market reach a level close to where it was prior to the crash. It has been said that the Federal Reserve is to increase mortgage rates 3 times throughout 2017. With that being said it is difficult to know when the mortgage rates are at their lowest until we see rises in the rates. At that point, we’ll look back and say, “Why didn’t we get those lower rates when we had the chance!” – This is simply buyer’s remorse.

We’ll look back and say, “Why didn’t we get those lower rates when we had the chance!” – This is simply buyer’s remorse.

I sat down with my preferred mortgage expert, Samantha Scherr, from Movement Mortgage to cover what happens to your purchase power if mortgage rates were to increase by 1.5%.


In this financial breakdown, we compare two homes purchased at two different mortgage rates both with similar monthly payments.

Home 1: On the left side
Has an interest rate of 4.25% – close to current market mortgage rates
The purchase price is $1,000,000
After calculating all principal mortgage payment, interest payments, HOA fees, and property tax the monthly payment comes out to $5,056

Home 2: On the right side
Has an interest rate of 5.75% – possibility of new rate after mortgage rate increases through the years
The purchase price is $870,000
After calculating all principal mortgage payment, interest payments, HOA fees, and property tax the monthly payment comes out to $5,046

So how come both homes have similar monthly payments even though Home 1 is $130,000 more expensive?? The interest rate is the cause for that. Buyers lose 13% of their purchase power when interest rates rise from 4.25% to 5.75%. With higher interest rates buyers get approved for lower loan amounts which can stop them from buying their ultimate dream home. In Los Angeles, we know that a 13% price difference can be huge in a home. The biggest difference you’ll see with the decrease of purchase power is the decrease in square footage of a home you are able to afford.

Feel free to reach out to Samantha Scherr for mortgage rates, mortgage advice or to get pre-approved. I am available to assist with any Los Angeles Real Estate needs you may have, serving all locations Santa Monica, Venice, Playa Vista, Playa Del Rey, Marina Del Rey, Culver City, Mar Vista, Hollywood, Mid-City, and Beverly hills.