Are Rising Rates Good?

You've heard about the rising interest rates; but does that mean you have missed the boat?

Even though mortgage rates are rising, they are still at an unprecedented low. They're at the same rate they were in 2010 when everyone was climbing over each other to get the historically low rates. However, because they're heading in an upwards direction now, it will have an impact on home sales and refinancing.

If you've been paying attention to the market you've noticed that home prices have been rising this year. Even though rates are still incredibly low, Jed Kolko warns that "we'll probably see home prices start to taper off a bit." That means the rise in home prices may slow down, but this won't happen immediately.

A more obvious change with the rising interest rates is less refinances. Because the rates are going up there will be less people refinancing their current mortgage for a lower rate. Here's the plus side: as less people refinance, more banks may loosen their strict lending practices to promote demand. Less restrictions means more people will be able to get a loan. Jed Kolko goes on to say that "A 5% mortgage that you can get is a lot better for the housing market than a 3.5% rate you can't get."

A lot of people were scared off with the rising interest rates. But the shock is wearing off and people are realizing that the rise is consistent with the recovery of the economy. The bottom line is rates are rising and they will continue to rise as the economy recovers. But as the economy is recovering now is still a great time to purchase a home.