GRAND RAPIDS, Mich. (WZZM) - Mortgage rates jumped, this week, to a seven year high. The hike is expected to cause ripple effects in the U.S. housing market, including West Michigan.
"It means a slightly higher payment right now. Plain and simple. With a higher interest rate it is going to affect your monthly mortgage," says Chris Alicki, a loan officer for Heartland Home Mortgage.
Thursday's average rate, for a 30 year fixed mortgage is around 4.6%. That is up basis points from last week. The last time rates were at this level was the Spring of 2011.
However, Alicki believes rates are still "historically low."
"They have gone up over the past couple of years here, but you have to take a deep breath and take it with a grain of salt," he said. "It is not something that is unaffordable for our community right now. It is about a $40 to $70 difference in your monthly payments. Most people have that within their budget when they are buying a home."
He may be right, however, the impact of the rate increase will make buying a home less affordable and refinancing, less attractive for many people.
"There is going to be a little bit of difference in what you an afford, definitely. So, if you are on those margins and you are thinking, 'maybe I can afford it or maybe I can't,' think about what you really can and save your pennies to be able to put more down and keep your payment as low as possible," says Tera Qualls, a realtor and CEO of Grand Properties Group.
Qualls says is unclear how the rate hike will play out in West Michigan, where there is already a very tight housing market.
"Right now in West Michigan we have extremely low inventory. What that means is there are very few houses on the market for people, especially in the mid-range of $175,000 to $250,000 and maybe even $300,000. The market inventory is very, very low," said Qualls. "So, getting into those home it takes a lot. 40 offers on one home is very possible, a lot of times. With interest rates going up, less people are going to be entering the market which will make it better for people who are already in the market. They will have less competition when they go in to buy. However, fewer people are going to be selling and moving up."
She predicts all of the factors,combined, will even out the market. But, admits it all depends on a very delicate and complex balance of circumstances.