Interest Rate

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The Interest Rate can have a Great Impact on the Real Estate Market

It's funny how such a small factor in buying a home can have such a great impact on the process. The interest rate is just one of those things you are forced to accept at face value, squabbling would only save you pennies if anything at all. But think about the fluctuations in the market and you will soon realize how the interest rate is a key factor, though not the only one, in determining the real estate market. You can also use the theory of interest rate to your advantage to help you decide when to buy or when not to.

Interest rate dictates the buyer's ability to buy

The Interest rate can have a favorable or negative impact on the value of a home. When the interest rate is low, buyers are able to qualify for larger houses than when the interest rate is high. This helps to drive prices up because more people are able to qualify for more expensive homes. As the interest rates increase, the buyer has to pay more in interest and subsequently is unable to qualify or afford as much as they could when interest rates are low.

How does this apply to me?

Well, the first thing to remember is that right now, the average mortgage interest rate remains at record lows. By locking in now before rates get too high, you will be able to afford the house that you may not be able to in the future. Although the interest rate may go up, it's not absolute that housing prices will go down because this factor is also related to demand, so as long as there is plenty of demand for housing, the prices will at the very least remain the same.