At the beginning of the month one of my clients, a first-time home-buyer, settled on their dream home with a 4.875% fixed rate mortgage. They're a conservative and careful couple with their finances so they bought a home they could easily afford on one income. They just missed locking in 4.75% by about a week. Of course they're a very happy couple even with the 1/8th increase. Just think - less than 5% for the 30 year duration of the loan makes it much more likely they'll be able to pay off their mortgage early. From a life planning perspective they're in really good shape. In 15 years or so they will be putting kids in college, probably will still have some of that mortgage to pay, but the payment will feel like much less to them as prices around them increase over time. But by the time they're making their last tuition payment they'll probably be close to making their last mortgage payment and then they can start putting all their new-found money towards retirement planning. If they control themselves, between 20 and 25 years from now they will be completely out of debt and socking away serious cash. I look for them to retire early and enjoy many years of retirement feeling young and in good health, enjoying their grandchildren, traveling, living a very comfortable life.
The point of all this? I fear so many are going to miss out on such good fortune because they're waiting for home values to fall further only to have the savings wiped out in higher interest rates. Are higher interest rates coming? Oh - most assuredly! As the saying goes, what goes up must come down and conversely, what goes down MUST also go up!
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