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How Rising and Falling Rates Impact Home Search

With an ever-changing real estate market, it can be hard to understand how certain trends can either help you or hurt you. While mortgage rates and house prices may rise and fall, they can affect buyers and sellers differently. We’re here to break it down.

Mortgage Rates Rising

When mortgage rates rise, it tends to inspire people to stay put. If homeowners are thinking of downgrading or upgrading their properties, they have time to wait until the market benefits them. Specifically, if homeowners are downgrading later in life, they’ll want to benefit from lower mortgage rates, and they can afford to wait in most cases.

When mortgage rates climb, it tends to inspire people to stay in their current homes, spending time and money on fixing them up, rather than looking for new properties. For buyers looking for starter homes, now may be a hard time. Owners that have smaller homes may not be too eager to sell them as they’ll face higher mortgage rates on new purchases, and smaller starter properties may be scarcer.

One benefit to higher mortgage rates means that less people are taking out loans, which makes lenders hungry. This drives lenders to become more competitive, which may benefit those getting mortgages. When there are less mortgages being applied for lenders may loosen their standards, increasing debt-to-income and loan-to-value ratios. Borrowers may also be cut some clack on credit scores.

Mortgage Rates Fall

When mortgage rates fall, there tends to be an influx of loan applications. When the rates are nice and low, everyone wants to get in on the deal. Lower mortgage rates also inspire homeowners to refinance, so in addition to higher loan application volume, refinance applications also go up.

With lower interest rates on mortgages, the housing market booms. It makes it more affordable for buyers to buy homes, and find higher value homes at lower prices. When mortgage rates go down, homeowners that previously may not have been considering selling property, might choose to upgrade property and get in with lower mortgage rates. This causes more housing to become available in a the real estate market, which could potentially drive home prices down slightly. If there are more properties available, pricing competitively is a sure way to make sure your home is found and that offers are made.

What this means

There are great times to buy a house and there are times that aren’t as beneficial to your wallet. Most of these rates can’t be controlled or predicted. When rates are high it can be harder to find a property, but you might get a lender who is more willing to work with you. When rates are low, you’re more likely to get a good deal on a mortgage, but everyone else will be applying for loans as well. Not everyone can afford to wait to house hunt, as timing is key, so if it’s time to look and apply, we say go for it.