Mortgage interest rate fluctuations are always big news as even small interest rate changes can impact your buying power.

When buying or selling a home, it is important to understand current interest rates and any projections for increases and decreases on the horizon. Interest rates will determine how much a mortgage will cost over the life of the loan, but those same rates can also impact people’s decision to buy or sell a home at any given time.

In general, interest rates are lower when the economy is doing well and higher when the economy is struggling. Until last year, the Federal Reserve kept rates at historically low levels in an effort to stimulate the economy. After reaching a 20-year high in the fall of 2022, interest rates began to decline after the 2023 New Year as the Federal reserve began cutting back on it’s inflation controls.

These changes can have a dramatic affect on home buyers and sellers. Even small increases can change the overall amount needed to pay back the mortgage, creating extra costs and higher monthly payments.

Higher rates can also affect people’s ability to qualify for a mortgage since the increase in rates will create higher monthly payments. Now, many financial and real estate professionals are predicting that interest rates have either peaked or will begin to decrease throughout 2023.

Interest rates also affect home prices. When interest rates rise, home prices typically fall because potential buyers will have less money to spend on a house when they have to pay more in interest each month. The 2020-2022 years were unique as the real estate market saw lower interest rates and higher home prices.

Despite higher interest rates, 2023 is shaping up to be a good year to buy and sell with interest rates steadying and possibly coming down in the first quarter. Home prices have also began to stabilize from the high price increases seen in 2020-2022. We have seen a still healthy buyer pool and expect 2023 to be a healthy real estate year.