The Federal Reserve’s interest rates play a significant role in the housing market, as they directly impact the rates that home buyers pay for mortgages. When the Fed raises interest rates, it becomes more expensive for buyers to borrow money to buy a home, which can in turn slow down the housing market.
Homebuyers may feel the impact of rising interest rates immediately, as they will have to pay more for their mortgage each month. For example, a buyer with a 30-year fixed-rate mortgage at 4% would pay around $955 per month for every $100,000 borrowed. If interest rates rise to 5%, that same buyer would pay around $1,073 per month.
Homeowners who are looking to refinance their mortgages will also be impacted by rising interest rates. Refinancing can be a great way to lower your monthly mortgage payment, but if interest rates have risen since you took out your original mortgage, it may not make sense to refinance anymore. Additionally, it will be more expensive to refinance your mortgage, meaning that many homeowners will choose to stay with their current mortgage instead.
Another impact on rising interest rates will be on home values. Rising interest rates lead us to a slow-down in the housing market, as fewer people are able to afford to purchase homes, this, in turn, could lead to a decrease in home values.
It is important to note that interest rates are still historically low, and even with a potential increase, it is still can be a great time to buy a home. Additionally, for those who are looking to refinance, it is important to do the math and see if it makes sense for you to do so. It’s also worth noting that there are programs to help first-time home buyers to buy a home with a lower down payment and lower credit score. Working with of my preferred lenders will help you understand where you are at financially, and if it is a good time for you to buy or sell a home.
Overall, rising interest rates can make it more expensive for home buyers to purchase or home owners refinance their mortgages, but it is important to keep in mind that interest rates are still relatively low, and there are still many ways to find a mortgage that works for you.
As always, it’s recommended that home buyers and homeowners consult with a financial advisor before making any decisions. I have great resources for lenders and a team of advisors who will be able to walk you through current rates and what the current market is doing.
