The Upside Of Higher Mortgage Interest Rate

Performance Property Real Estate Question

Q: Mortgage rates have been going up recently. Do you think that makes now a bad time to buy real estate? Eric, Livingston, NJ

A: When you borrow money to buy a home, higher interest rates reduce the amount of home you can buy. For every 1% increase in mortgage interest rates, your purchasing power as a homeowner declines by 9%. However, higher mortgage rates may present a silver lining in today’s US housing markets. Home prices in most of the US in the last few years have increased at unsustainable levels and low mortgage interest rates have probably exacerbated those home price increases. Higher mortgage rates will make it more difficult for many home buyers to purchase a home, particularly first time home buyers. However, higher mortgage rates may also slow runaway home price increases and give home builders more time to catch up with home buying demand. Thanks for your question, Eric.
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