How Interest Rates Affect Purchasing Power

This new year brings much excitement and anticipation of interest rate cuts throughout the year. No one can predict exactly where things will end, but the Fed is predicted to make a series of .25% cuts to the federal funds rates throughout the year. This will, in turn, drop mortgage rates, which essentially equates to a free increase in purchase power for our clients.

For each .25 drop in interest rate, your client gets approximately a 5% bump in purchase power. For example, with a $300,000 purchase price, a 5% down payment on a 30-year term at a 7% interest rate (APR 7.526). This would have a principal and payment of $1,896.

If that interest rate drops down to 6.75% (APR 7.357), then you could afford a $315,000 purchase price for approximately the same payment of $1,940. Therefore, your clients can afford a better house for the same monthly budget.

Please note that the examples are not advertisements for interest rates or programs.  We wanted to give you a look at the math. To see exactly how your clients can benefit, please have them contact Andy Schoemehl at 314-221-7797.


Andy Schoemehl | Vice President
314.221.7797 phone | 636.898.1017 fax
[email protected]
NMLS #258507
16253 Swingley Ridge Rd, Suite 200
Chesterfield, MO 63017

About the Author
Worth Clark Realty
We’re a true full-service real estate brokerage, providing innovative and value-driven services to help people buy, sell, and lease residential real estate.

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