How Rising Mortgage Rates Are Affecting the Housing Market

by contentwriter

Author: Kelvin Hood

What happens when mortgage rates rise? Will home prices rise? 

The answer depends on where you live. Rising rates mean significant changes if you own a house or plan to buy one soon.

Rising interest rates have become a trendy matter lately. According to the Federal Reserve Bank, the average 30-year fixed rate has climbed to 4.25 percent from 3.6 percent, which it was last year. While higher mortgage rates can negatively affect the markets, they also present opportunities for new investors.

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Average House Price

Mortgage rates are rapidly rising — the Federal Property Finance Agency’s index presumably reflects a slowdown in the housing market. Despite a shortage of new homes, the average house price is 20% higher this year than in 2021. Analysts are concerned that the property market might fall due to rising mortgage interest rates.

Home prices might be high soon, although the market is starting to cool down because most people cannot afford a home.

The housing market in the United States has changed significantly from 28 years ago. The typical house price in 1994 was equivalent to just $214,000 after accounting for inflation. So far, in 2022, the median price of a house is $350,000.

There is a severe reduction of available houses for today’s purchasers. According to a real estate data provider, CoreLogic, home prices increased by a record 20 percent between February 2021 and February 2022 due to a mismatch. 

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Influence on the situation

  • Higher rates have quickly impacted mortgage demand: According to Mortgage Bankers Association weekly figures, there were 5% fewer mortgage loan applications than before.
  • Higher rates generate a retraction or delay in house purchases when affordability issues and low inventory are present.
  • Higher rates are a different piece of bad news for first-time homebuyers struggling with availability and skyrocketing costs. Meanwhile, the market for second homes, which has been pressuring inventories, may benefit from the exact causes that have helped calm down the excitement in a related industry.
  • Home prices have risen so quickly and steeply in some places that have locals. Properties have been priced out and even the rentals. According to online brokerage, this was the first time in over two years that demand for second houses, as indicated by mortgage rate locking, actually fell below demand for first homes.
  • Depending on how much of the home’s worth the owner is financing, the agency increased upfront costs on second-home mortgages starting on April 1 to anywhere between 1.125 percent and 4.125 percent. Only second-home purchasers with low down payments were previously subject to this tax, which peaked at a modest 0.25 percent.


Generally, everyone can understand that the real estate industry is volatile. Most people cannot afford down payment home buyers. The market is constantly changing, and prices are rising.

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