Today I’ll be covering the topic of interest rates and giving you a rundown of what a 1% uptick in rates will mean for both buyers and sellers.

Interest rates are on the rise. It’s important to understand the overall impact this has on our market. 

What does a 1% change mean for buyers? 

With rising interest rates comes lower purchasing power for the average homebuyer in the market. 

Think about it in these terms: If you were to purchase a home today for, say, $200,000, a 1% hike in interest rates could change your buying power considerably. In the short-term, your mortgage might be $115 to $120 higher month to month, but over the life of your loan, that translates to as much as $44,000.

“When a 1% higher interest rate is introduced into the equation, affordability is now affected.”

What does a 1% change mean for sellers? 

Let’s take the $200,000 property example and apply that to the seller—at lower interest rates, a percentage of the population would find that home to be in their price range. 

When a 1% higher interest rate is introduced into the equation, affordability is now affected. Now, your home may not be affordable to the larger pool of buyers that found it to be affordable before the interest rate increase. 

In other words, rising interest rates undercut or level off demand, which is the common result of a shifting market. 

The good news for sellers is that inventory remains relatively low, according to most authorities on the subject. For the time being, we’re still in a seller’s market with a potential shift at hand. We’d like to think this is simply a healthy market correction that crops up every 10 to 15 years.  

If you have questions about purchasing or selling power or if you need to know if now is the time to buy or sell, we’d love to put you in touch with a mortgage expert. 

You can also schedule a free consultation with us. Please reach out to us with any of your real estate needs. We’d love to assist you!