Housing market experts suggest that rising mortgage rates could affect a home buyer's purchasing power. Mortgage rates have been on the rise since the beginning of 2021 and are expected to continue increasing throughout the year. This trend will likely make it harder for potential buyers to qualify for mortgages and may reduce their ability to purchase a home.
This article will focus on how rising mortgage rates can impact house-buying power and the potential strategies home buyers can use to offset this issue.
Direct Impact On The Potential House-buyer
As these rates increase, the amount of money a potential home buyer can borrow decreases, thus reducing their overall purchasing power. A recent survey revealed that rising mortgage rates might have an immediate impact on the ability of potential buyers to purchase a home.
Additionally, this trend could have an even more pronounced effect on buyers already struggling to afford the cost of a home, as rising rates could mean they need to make additional sacrifices to qualify for a loan.
Impact On Home Value
An increase in mortgage rates will lead to an increase in home value. This is because high mortgage rates can make it difficult for buyers to get loans, making it harder for them to purchase homes – which will increase the prices of homes.
As such, higher mortgage rates could positively affect the real estate market by pushing up the prices of houses. However, those purchasing houses can find it difficult to afford the higher rates.
Low Demand In The Markets
As much as increased mortgage rates positively influence home value, they can limit the demand for homes in certain markets. With fewer buyers qualifying to buy a home, there can be a decline in the number of houses sold, which could lead to lower prices or longer market times. This will directly affect the economy as the real estate sector is a key contributor to economic growth.
Strategies To Offset The Impact Of Rising Mortgage Rates
Despite all these ructions in the market, there are a few strategies that potential buyers can use to offset the impact of rising mortgage rates:
Find A Trusted Real Estate Agent
No matter what strategies you choose, it is important to find a trusted real estate agent who can help navigate the complexities of buying a home in an ever-shifting market. A good real estate agent will have knowledge of current mortgage rates and even send you an invoice for contract work so that you can understand all the inclusions in the contract and make better financial decisions.
Consider An Adjustable Rate Mortgage (ARM)
ARMs are mortgages with adjustable rates, meaning the rate can change over time. This type of mortgage may be suitable for those who are looking to purchase a home in the short term and plan on selling it down the line.
Put More Money Down
Making a larger down payment toward a home purchase can help offset the rising mortgage rates' impact. A larger down payment means buyers can borrow less, which could make it easier for them to qualify for a loan.
Take Advantage Of Government Programs
There are various government programs that can help buyers purchase a home despite rising mortgage rates. For example, the Federal Housing Administration (FHA) provides loans with low down payments and better interest rates.
What Does The Future Hold?
As mortgage rates continue to increase, it is becoming increasingly important for buyers to take the necessary steps to mitigate their risk. It is unclear what the future holds, but it is likely that mortgage rates will continue to rise in the coming years.
As such, potential homeowners should be prepared to adjust their strategies and consider all available options as they look to purchase a home in this new market. All you have to do is remain vigilant and proactive in order to make the best decisions for your future.
