What The New Interest Rates Mean For The Market (And For You)

Dated: April 14 2022

Views: 60

Increasing Interest Rates Housing Market Blog

By O’Brien Realty 

Recently, interest rates have increased to around 5%. Here’s how it will impact the housing market, and you. 


With interest rates on the rise, many people are panicking about a “housing bubble burst”, that interest rates are skyrocketing, how no one can buy a home now and that basically, we are all doomed. But here’s the thing, it's not true. Yes, the current interest rates have been rising. Right now, they are currently around 5%. But despite this, they are still historically low. Although we haven’t seen rates this persistently high since 2011, there have been much higher rates before. In the early 1980’s when they were in the 17% range! It makes you feel better about the 5% now doesn’t it.  


Even so, you are sure to have a lot of questions about what this means for the market and (maybe more importantly) for you. So here is a guide to interest rates and the housing market, and how it will impact you and your real estate needs. 


So how exactly do interest rates impact the housing market? 

First of all, it is important to note that interest rates are just one part of the housing market. There are many complex factors that impact the market, and interest rates are just one area we can look at to determine the housing market. With that being said, interest rates are important and impact almost all aspects of the housing market. They are what determine home affordability for new buyers, impact the pricing of homes on the market, and play a huge role in deciding whether or not to sell. 


What does it mean when the rates change?

Typically, interest rates are decreased to encourage people to buy. With them being lowered, buyers can purchase a new home with a lower rate and in return, a lower mortgage payment. This will increase the demand for homes and “speed up” the market. 


When the rates are increased, it is to “slow down” the market. By increasing the rates, and potential mortgage payments, it will discourage people from buying new homes and the housing demand will go down. 


What does this mean for the rest of the 2022 housing market?

Well, in 2022 we have been seeing a rise in interest rates which is impacting the market in a number of ways. Usually, increasing interest rates leads to a decrease in home affordability, which then causes the demand and home prices to go down. So essentially, the plan is to raise the interest rates to “cool off” the record-hot 2022 housing market, by decreasing affordability and demand for houses. Therefore, giving builders and developers time to get the home inventory back up, and stabilize the housing market.


However, this may not be the immediate reaction to the rate increase, especially since we are in such a unique market. Remember, there are many different factors (supply chain issues, inflation, the war in Ukraine, the pandemic and more) impacting the demand for homes, so it might take a while for the high demand to go down.


Ok, that makes sense, but how does it impact me? 

Rising interest rates actually mean different things depending on if you are a homeowner, buyer, seller or renter. 


If you are a Homeowner- The increase in rates is causing many homeowners to consider “locking-in” and staying put in their current homes since they have a fixed-mortgage rate. Buying a new home when the interest rates are higher might mean that if you buy a new home, your new mortgage payments may be higher than your current ones. However, the interest rates are still historically low, and as of now the demand is still record high. Now is still the best time to sell your home and get a great price. If you are interested in seeing what your home is currently worth, then Click Here for a Free Home Valuation Report.


If you are a Buyer- As the interest rates increase, it is important to remember that this will increase your potential payments when you purchase a home. So be sure to take this into account in your home search. With this increase in interest rates, many home buyers are worried that they will get “locked out” of the housing market. As the interest rates rise, home affordability decreases, and fewer buyers will be able to afford the increased mortgage payments, especially with the historic increase in housing prices. But that doesn’t mean you should stop your search! In fact, with the rates going up, many buyers might take a step back to reevaluate, giving you an opportunity to beat the competition and get your home! (Want to know a few extra buying secrets to beat the competition?- Click Here!) Plus, it is important to remember that there are other financial advantages to buying and owning a home. So don’t panic! The interest rates are still historically low, and you still can buy the home of your dreams! Ready to start your search with the “Best of Southern Maryland”?Click Here to connect with an agent or start looking at Southern Maryland Real Estate Here.

If you are a Seller- Now is still the best time to sell! With such a high demand for homes and homes selling for record prices, you can still sell your home for a great price! However, it is important to remember that with the increase in interest rates, there might be some decrease in buyer demand. What this means is you may not have as many potential buyers come to your open house or put in offers. But don’t worry, even with the potential for a market “cool-down”, our agents will still help you get the best price for your home!


If you are a Renter- Higher interest rates don’t just impact homebuyers, renters might also see some changes. With the rising inflation rates we are currently seeing coupled with raised interest rates, high rental demand, and shrinking rental inventory, rent prices are increasing. What this means is it might be a good time to reevaluate if renting or purchasing a home might be better for you. Although it is commonly thought that renting is cheaper than buying a home, this is not always the case. In fact, owning a home can help you save money with fixed-mortgage payments as opposed to increasing rent costs. Plus, there are a number of down payment programs and financial assistance programs to help get you started. But the best thing you can do now, is to start talking to a lender. They can help you determine the best housing option for you now, and the future. Get started here.



Yes, there has been a recent increase in interest rates. As of April 14th, they are hovering close to 5%. But, remember that this is a unique housing market where housing demand is high and the inventory is low, and there are many other complex factors impacting it. So although an increase in interest rates usually means a housing market “cool-down” with decreased buying, this may not be the immediate response. But it is important not to panic! Remember, these interest rates are still historically low, and the housing market is cyclic. Change is inevitable in real estate and even if the rates rise, it won’t be this way forever. It doesn’t matter if you are a buyer, seller, renter, or homeowner, you still have options- and we can help you determine the best ones for you. Get started by contacting an O’Brien agent today!

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