The million dollar question I get asked quite often is, are interest rates going up this year?
We’ve been having this discussion every year for a long time now, but it’s sure showing signs of being THE YEAR.
Keep in mind that long term mortgage rates are influenced by many things, so no one can be 100% certain what they will be.
BUT, the federal reserve seems to have their backs against the wall since inflation has really taken off the last year.
That usually means the fed has to raise the prime rate, which will have an inevitable rippling effect throughout the market.
The projections that I was reading were indicating the 30 year fixed rate could hit 4% later in 2022.
It hit 4% just last week with some lenders. Wow. It’s not even March yet.
So, the long and short is this: interest rates are definitely making a move this year.
The net affect on the real estate market? Mostly, this will put a kink in buyer’s home affordability.
As an example, if interest rates increase from 3.5% to 4.0%, that might mean a first time buyer would have to settle for a $360k home instead of a $400k home.
This is just a loose example, but that’s what happens to affordability when rates go up.
The rate of property appreciation should also slow down a bit with this downward pressure on prices.
All in all, rising rates this year will definitely slow down the real estate market a bit. But it won’t stop, that’s for sure.
David Baker, MBA, CRS, GRI, SFR, e-PRO
Broker/Owner, Baker Realty Group