Rising interest rates are a common topic of discussion in the real estate industry. As the mortgage interest rates change, these trends have an undeniable impact on the real estate market. Whether you are planning to buy or sell your home, the best thing you can do is work with an experienced real estate agent and mortgage broker to get the best financing for the transaction or selling before interest rates go higher.
Higher Interest Rates Affect Buying Power
Some homeowners mistakenly assume that high interest rates won’t have an impact when it is time to sell their home. The truth is your buyers will be affected by the current interest rates, which can have an impact on the price that is paid for the property.
Lower interest rates mean your buyers will have more buying power and can pay more for your home, because it will cost them less for their money. Therefore, it is better selling before interest rates go higher.
What Happens When Interest Rates Go Up?
1% might seem like a comparatively small increase for an interest rate, but this change can have a significant impact on the buyer’s monthly payment. Depending on the price point of the buyer, a rate increase of 1% lowers the purchasing power by 9 – 11%!
For example, if a buyer is looking at homes in the $400,000 price range, then an increase in interest rates from 3% to 4% means the monthly payment will go from $1,686 to $1,909… an increase of $223 per month just for interest costs. As a result, the home price needs to be lower to make room for the extra interest expenses.
This change can have a huge impact in today’s real estate market, making it harder to afford the right home at the right price point. As a seller, higher interest rates could result in a smaller pool of qualified buyers. You can avoid this problem by selling before interest rates go higher, ensuring that you aren’t missing out on buyers who are interested in the type of home you are selling.
Will Interest Rates Increase?
No one can predict with surety future interest rate trends. It is normal to have fluctuations and corrections in the mortgage and real estate industries. Most homeowners don’t have the industry knowledge or expertise to identify the right timing or services, which is why it is imperative to work with a trusted team.
At DUFFY Realty, we are working hard to help you negotiate the best deal when buying or selling a home. If you have questions about how interest rates will affect your purchase, then you are welcome to contact us at any time for personal recommendations. We are the real estate experts in the greater Atlanta area, and our professional team is here to assist with anything that you need. Call today: (678) 318-1700