One of the biggest reasons we hear about why would-be sellers don’t sell their South Bay luxury properties is that they feel that their current interest rates are so low that they literally can’t leave their home for a new one without getting a “higher” interest rate. They feel literally locked in and don’t want to give up the lowest interest rates they’ve ever seen.
What we say to these property owners often changes their minds, and we’re going to share that information with you today too. Interest rates right now are higher than they were in 2012, that’s for sure. They were 3% or so back then, now they in the low 4% range. However, in 1970, mortgage interest rates were 18%. In 2001, they were 7%. Putting today’s interest rates in perspective helps property owners understand that rates are still incredibly low. The difference between a 3% loan and a 4% loan may not actually be as dramatic as it sounds. Getting a new property at a 1% higher interest rate may not be a bad decision at all.
Interest rates are 4% now, but professionals are predicting that in 2015 they will be in the 5% range. After that? Probably higher for a while. The point is, right now rates are still low but they will not always be. If a seller is truly afraid of higher interest rates, there is even more reasons to list their current property now before rates really do go higher.
And last, we like to remind clients that purchasing a new home is not really about interest rates and numbers, but about quality of life. It’s about having the space you need in the community you need, the home you love versus the home that doesn’t fulfill your needs. That’s what a purchase is really about, and being afraid to let go of a current property can keep you from that quality of life.