Interest rates are currently in the 3.7% range (as of mid 2015). Freddie Mac predicts that by the time we reach the end of 2015, rates will climb to at least 4% and will continue to climb in 2016. What buyers need to understand is that, as interest rates rise, purchasing power goes down.
Here's a good rule of thumb: as the rate goes up 1%, your buying power goes down by 11%. For example, on a 30 year fixed rate mortgage the mortgage payment on $400k loan (80% of $500K property) at a 3.5% rate is the same as the payment on $356k loan (80% of $445K property) at 4.5%.
With rates so low and expected to rise, now is a great time to buy! For home sellers, buyers will be able to pay more for your house today than they will in a year as they have more purchasing power now - so, it is a great time to sell!
30 year fixed rates have ranged as high as 18.5% during the past 4 decades. Here are the Average 30 Year Rates for each of the last 4 decades, putting today's rates in perspective:
1970's - 9.03%
1980's - 12.5%
1990's - 8.12%
2000's - 6.92%
2010 - 4.69%
2015 - 3.7%
The average over the last 4 decades (1970 through 2009) has been 8.97%. Buyers should understand what a bargain 3.7% (today) really is. This alone is ample reason to get off the fence!