Interest rates are very low now. 4% is the “normal” conventional mortgage rate. To see what that means for monthly payment, look at the chart below. Things change a bit for mortgages above $400,000, so-called “Jumbo” loans, so I have not included them. You’ll note the difference a change to 5% interest makes: more than enough for a decent restaurant meal each month.
The good news for real estate is the Federal Reserve intends to keep interest rates at 0.25% at least through 2014. That means mortgage rates will stay low and might, maybe, even go a wee bit lower than their current 3.75% – 4.00% rates.
The bad news for real estate is this action was taken because the economy is not recovering as strongly as possible. Put differently, the economic indicators are positive, albeit not robust, but the Fed doesn’t really believe that jobs will be created at the rate the economy really needs.
A good piece on today’s Fed action is at the (conservative) Canadian Globe and Mail: http://www.theglobeandmail.com/report-on-business/economy/interest-rates/fed-plans-ultra-low-rates-until-end-of-2014/article2314515/