We've been hearing about the increase in interest rates all year and now, it seems as though we're in the thick of it now. Last week the average was 4.55% and as of this week, a 30 year fixed rate is 4.61%. Just to put it in better perspective, some rates were 3.99% just a few months ago in January. These rates are climbing at an exponential rate- much faster than many economists predicted. There has been a steep rise in prices for commodities such as lumber and gasoline which have stoked some inflation worries. These concerns of higher rates are quite possibly prompting homeowners to keep their low rate mortgages rather than trade up for better properties. Just 1% increase in an interest rate can lead to a reduction in home sales of 7-8%. This increase is especially discouraging to first-time and moderate-income borrowers because not only is the inventory of homes for sale on the market at an all time low, there are far less of the more 'affordable' homes available. Even such a slight increase in the interest rate on your loan will affect your monthly mortgage payment quite noticeably. For example, with a 4% rate on a $250,000 loan your monthly mortgage would be about $1,194; with a 5% on the same amount, it would be roughly $1,342. That's enough to make or break the deal for a lot of people, especially when they are already shopping at the top of their budget- which is something that is happening a lot these days with so few houses to choose from. At this point, it's almost scary to try to wait until things in the housing market have come back down a little more; there's truly no end in sight as of right now.