Understanding Mortgage Interest Rates and How They Impact Your Home

Understanding Mortgage Interest Rates and How They Impact Your Home

The economy has seen many extremes in the past few years, which has led to many questioning the best way forward in regard to buying and selling their homes. When evaluating whether now is a good time to sell, there are many factors that a home seller must consider.

Evaluating the Market

Chances are, if you’ve been watching the market closely for the past few years, you’ve seen that the housing prices have been at record highs. This increase was the result of housing shortages due to construction hold-ups related to the pandemic. Either projects were abandoned, or new construction was delayed.

This most recent market trend was in contrast to the housing crash of 2006, where there was an overabundance of houses on the market and not enough people buying homes. In an effort to jump-start the economy, the Fed wanted to motivate buyers to purchase homes, so they significantly decreased interest rates.

Now, in an effort to curtail these high numbers so that the price of goods and housing do not outpace job and wage growth, the Fed has increased interest rates.

Understanding interest rates.

An increase in interest rates means that it costs more to borrow money. If it costs more to borrow money, it means the monthly payment on a home goes up. If the monthly payment goes up, then the ability to purchase more expensive homes decreases. If interest rates increase enough, you will see home prices start to fall.

During the housing crash of the early 2000s, we saw interest rates begin to decrease in an effort to counteract the economy’s recession. By the 2010s, some 30-year mortgage interest rates were as low as 3.35%. From there, interest rates slowly began to increase.

At the beginning of the pandemic, with a practically stagnant economy that threatened to potentially throw us into a depression, the Fed cut interest rates to historic lows, resulting in mortgage interest rates of 2.68%. Since that time, due in part to housing and goods shortages, inflation has taken hold of the economy. As a result, interest rates now stand at about 7%.

These increased interest rates have helped to curtail the soaring home prices that went up during the pandemic, and as a result, we are slowly beginning to see home prices somewhat stabilize.

Is a housing crash in the forecast?

Currently, mortgage rates are predicted to be around 6.6% during the first quarter of 2023, and predicted to decrease incrementally by the fourth quarter, to an estimated 6.2%. These predictions, however, are reliant on little change in the economy. Unfortunately, some are predicting that there will be a housing crash by as much as 20% in the next year.

Why You Should Sell Now

Many individuals choose to sell their homes due to their life circumstances. If you are making a job change that relocates you to a different city, more than likely, you need the funds from selling your home to funnel into your new home purchase.

An important concept to understand is that during the 1980s, home mortgage interest rates hit an all-time high at over 18%. While these rates were short lived and proceeded to stabilize at around 9% for the rest of the decade, home mortgage interest rates averaged about 7.75%. Although current interest rates are higher than they have been in the past couple of decades, they are lower than the all-time average. You also have the ability to refinance your home if interest rates continue to drop.

With the predicted housing crash, selling your home now could be to your benefit. If you don’t want to deal with the stress of preparing your home for the market, there are companies that will purchase your home as-is. They can even offer lease-back options as you prepare to purchase your next home.


When you evaluate the housing market and understand historical context, it becomes less stressful. Regardless, higher interest rates may be more difficult to stomach after decades of historically low rates. With some predicting a housing crash, it could be beneficial to sell now to get the most significant return on your home.

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