Real Estate Insider Blog

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How does the recent interest rate hike affect real estate?


Under a federal funds rate increase of 1.25 - 1.50 points, mortgage rates are expected to increase. Hovering around 4%, mortgage rates are projected to inch up slightly, towards 5%, under the new federal interest rates. Rising mortgage rates impact every aspect of buying and selling a home and should be closely monitored by all housing market participants.


Generally indicating a stronger economy, a federal interest rate hike suggests confidence in the economy and a need for higher rates to maintain market competitively. From a home buyer's perspective, as interest rates rise, affordability decreases. For example, a buyer who qualifies for a $400,000 mortgage at 4% interest will only qualify for a $355,000 loan at 5% interest. An increase in mortgage interest lowers purchasing power.

Buying a home under the current mortgage interest rates is the best way to maximize purchasing power and lock in lower monthly payments (assuming a fixed-rate mortgage). When the economy is expected to grow and is indicated to be in good health via a federal interest rate hike, the best time to participate in the housing market as a buyer is now. Benefit from the historically low mortgage interest rates and lock in a rate under 5% now.


Impacting sellers in a slightly different way, rising interest rates drive down housing prices and lower property values. For example, a seller can choose to list a house at $400,000, but rising rates may...

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What will post-election mortgage rate increases mean for the Clearwater area housing market?

The bond market started going haywire after the election -- here's the result

Immediately after the election, the bond market was splattered all over the windshield, taking mortgage rates up with it.

  • Once you have destabilized the bond market, re-stabilization takes time. Often a long time.
  • Our election surprise has unpleasant consequences for mortgages and housing. Not just sometime in the future, it starts right now and if history shows the rates can spike considerably. Change is always a certainty and rates always change.

The most immediate concern right now is that the 10-year T-note has soared to 2.07 percent, the first time so high since last January and wiping out six months of chart support near 1.80 percent — and the next support is near 2.50 percent, mortgages 4.25 percent-4.50 percent.

“Mortgage rates have spiked more than 20 basis points following the results of the presidential election on Tuesday, as we assess the degree of political and economic uncertainty that Trump’s win introduced to the market and as investors move away from U.S government assets, including U.S. mortgage-backed securities, in favor of relatively safer investments,” said Erin Lantz, Zillow Group vice president of mortgages, in a statement.

“As we continue to learn more about shape of the new administration, their policies, and the global reaction, we expect more volatility as markets try to put a price on the political...

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