Isn’t that the million dollar question! And experts are all over the place on this one, I’ve seen estimates ranging from 5.0% to 7.0% by the end of the year. I think it’s safe to say rates WILL be higher, let’s just go with the assumption they’re at 6.00% on the 30 year fixed by year end. So the question is, what does that do to your buying power? Great question, I’m glad I asked it!
I’ve borrowed this little sliding interest rate chart here to show you exactly what happens to your buying power as rates increase. I’ve highlighted what happens to ones buying power as interest rates slide from 5.00% (today) to 6.00% (at year end). This chart shows the principle and interest payment for a $400k loan amount at 5.00% equals $2,148 per month, follow the slide and notice as rates go up to 6.00% your buying power decreases. At 6.00% you would need to drop your loan amount to $360k in order to keep your payments at $2,158 per month. 
So what’s the take away here guys? Well besides the fact that low interest is good and high interest is bad (I’m the king of obvious I know), it tells us that for every one percent interest rates rise, our buying power decreases by 10%. Does that make sense? When rates increase from 5% to 6% you have to drop your loan amount from $400k to $360k ($40k or 10% of the purchase price) in order to keep payments in a similar range.
As a buyer that means, if property prices stay the same this year, you will actually be paying 10% more for your property because interest rates are rising. Now if you are paying cash, you’re obviously not paying 10% more, but if you are financing your next home you are basically paying 10% more for that property due to the increased interest rate and borrowing costs.
Mortgage rates and home affordability have improved lately, thanks to an unlikely ally — Mother Nature.
After a strong March showing and a surprise upward-revision for February, Housing Starts are, once again, trending better.