Should you buy a property now? Impact of Rising Mortgage Rates on the Real Estate Market


The real estate market is currently facing challenges as mortgage rates have surpassed 7%, resulting in a decline in both purchase and refinance applications. This article aims to examine the implications of rising rates on the housing market and discuss the factors contributing to this shift.

The Surge in Mortgage Rates

The average rate on the popular 30-year fixed mortgage crossed over 7% on Tuesday, according to Mortgage News Daily, marking the highest level since early March. The upward trajectory of rates can be attributed to a combination of factors that have created concerns among investors. Uncertainty over the Federal Reserve’s decisions regarding interest rates in light of the robust economy and the ongoing battle over raising the debt ceiling and the possibility of a U.S. default have all played a role in the upward movement of rates.

The Impact on Mortgage Demand

The rising mortgage rates have had a direct impact on the demand for home purchases and refinancing. Mortgage applications to purchase a home dropped 4% for the week and were 30% lower compared to the same week one year ago. This decline in purchase applications can be attributed to the volatility of rates and the scarcity of available inventory.

Applications to refinance a home loan decreased by 5% from the previous week and were 44% lower compared to the same week one year ago. The reduced number of borrowers seeking to refinance is due to a combination of factors. Firstly, rates were significantly lower a year ago, making the refinancing option less attractive. Secondly, banks have tightened lending due to recent bank failures, making it more challenging for borrowers to qualify for refinancing.

Challenges and Future Outlook

The current state of the mortgage market poses challenges for both homebuyers and industry professionals. The limited availability of inventory and the volatile nature of rates have hindered sustained growth in purchase applications. Additionally, the tightening of lending standards further limits the number of eligible borrowers.

Looking ahead, even if the debt crisis is resolved without default, it is unlikely that rates will significantly decrease in the near future. Factors such as improving bank sentiment, mixed economic data, and the Federal Reserve’s commitment to a “higher for longer” rate approach contribute to this projection.


Is it good to buy now? The increase in rates has resulted in a decline in both purchase and refinance applications. The scarcity of available inventory and tightened lending conditions have further complicated the situation. 

Anyway, if you are looking for a reason to buy now despite the challenges, the reduced competition in the market may work in your favor, allowing you to have more leverage during negotiations. You could potentially secure a better purchase price or negotiate favorable terms, such as contingencies or seller concessions. This could result in cost savings or added benefits for you as a buyer.

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