Rising Mortgage Rates Won't Necessarily Stop Housing Market

A growing economy may balance out effect of increasing mortgage rates

Rising Mortgage Rates Won't Necessarily Stop Housing Market
December 16, 2016

Experts have suggested that, although there are concerns over the rising rates for mortgages, a growing economy often leads to higher wages. This means that any gains in home loan costs could be counteracted by higher disposable income levels for Americans across the country.

Mortgage rates have moved considerably over the past few weeks, gaining from 3.5 to around 4.25 percent, and the Federal Reserve just raised interest rates. Such an increase isn't necessarily bad for the housing sector. After all, a stronger economy benefits real estate.

In a recent interview for National Mortgage News, Fannie Mae Chief Economist Doug Duncan said, "If interest rates are rising because the economy is growing more rapidly, then, typically, incomes also rise, and the rise in incomes offset the increase in the size of the mortgage payment, and housing goes just fine."

There are still concerns amongst homebuyers, though, particularly those who are trying to buy real estate for the first time. In a survey by Berkshire Hathaway HomeServices, 79 percent of potential buyers said that rising rates are a challenge. President of the firm, Stephen Phillips, said "that despite how it may seem to first-time homebuyers, mortgage rates are still near historic lows. Either way, the true impact of the rate increases will not be seen until 2017.

If you are interested in refinancing your home loan, visit the MoneyTips Mortgage Planner.


Photo ©iStockphoto.com/AlexRaths

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