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For the past several decades, interest rates across the board have been at a historic low. While that is still technically true, interest rates have been on the rise due to increasing inflation in most markets. Consumer prices have shot up 8.6%, according to the U.S. Bureau of Labor Statistics, the highest  increase since the 1980s. Real estate markets, like anything else, have been affected by this growing interest.

Current Mortgage Rates

The rising interest rate is not necessarily a cause for concern. In fact, it’s a somewhat predictable instability—when inflation is on the rise, like now, then interest rates typically follow. The Federal Reserve (FED) raises interest rates in an attempt to let some of the air out of markets that are falling prey to inflation at higher and higher rates. In June 2022, the FED raised interest rates by .75%, the highest increase since the 1990s, in an attempt to further slow inflation. However, that does not necessarily mean crisis mode when it comes to mortgages and the real estate market.

While mortgage rates have increased from around 5% for a fixed-rate, 30-year mortgage, generally the rates are still better than they were even a decade or 15 years ago.

Sellers’ Point of View

Rising interest rates generally make homes more expensive for buyers, which hampers demand. Moreover, the average price of homes in the United States reached more than 400,000, an almost 20% increase from prior years, which also decreases the number of prospective buyers.

However, if the economy grows in tandem with rising rates, as the FED is trying to ensure, then rising mortgage rates will not have an overwhelming impact on property values. Additionally, demand for rentals will increase, and the sale of multi-family units has seen soaring demand from investors.

Buyers’ Point of View

No matter rising interest rates, historically, the rates today promise significantly cheaper debt than in decades past. A good way to make sure you are doing your homework in terms of lenders and mortgage rates is by getting quotes from multiple lenders to be sure that you receive the best possible deal. However, because of the shifting rates, it can be a bad idea to waffle around waiting for the best possible rate, because of the rate things are changing. If you receive a rate you think you will like and you have checked with other comparable lenders, it might be a good idea to lock it in. If you don’t, chances are it will change quickly and you might not like what it becomes.

While now is not necessarily a bad time to buy, it is true that the housing supply is down which forces demand to skyrocket. That, of course, comes with its own host of problems. In today’s market, it’s best to be patient and creative with your home search and get assistance from experienced, professional real estate agents. Making sure that you’re as prepared as possible in your home search is one of the best things you can do in this market.

At the end of the day, fixed rates are still at a historic low. A 5% fixed, 30-year mortgage rate is still very low especially when compared with rates dating back to 1971. No matter what, having a seasoned professional who knows how to get the best out of the market, regardless of its stability, will help you make the best choices for your future properties and finances.