Bash & Co. Sotheby’s International Realty: A look at interest rates

Bash walks us through why mortgage interest rates behave the way they do.

Ben Franklin once said, “An investment in knowledge always pays the best interest.” I thought this was a nice segue into the topic for today’s column. Interest rates. A necessary evil one must pay attention to in this line of work. So today I am going to share some insight on mortgage interest rates and why they behave the way they do.

What is an interest rate?

Essentially, interest rates indicate the price you pay to borrow money. Lenders charge interest to use an asset or a line of credit. This amount is typically a percentage. On an annual basis you either pay – if you are the borrower – or receive – if you’re the lender – this percentage of the total amount of the loan. Several variables can affect mortgage rates including changes in supply and demand, inflation and global factors. All of which are in the news currently!

Supply and demand

According to the Mortgage Bankers Association (MBA) “The average interest rate on the most popular U.S. home loan rose to its highest level since June 2009 last week and demand for mortgages ebbed as the impact of rising costs began to bite.” However, the housing market continues to provide a lack of clarity, mostly due to the record low supply that is still taking place.

Inflation and global factors

Inflation can affect mortgage rates in a couple of ways. Essentially, inflation allows borrowers to pay lenders back with money worth less than when it was initially borrowed, which benefits borrowers. Conversely, when inflation creates price increases, also increased is the demand for credit. This raises interest rates and lenders are the ones reaping the benefits. The ongoing global pandemic, as well as the war in Ukraine bear some responsibility for the current inflation in the US and therefore also influence the increased interest rates we are currently experiencing.

All that said – it’s not all gloom and doom. In spite of increasing interest rates and home prices, right now could be the perfect time for you to purchase a home. Why? Because others are choosing not to! If you are choosing to buy a home in this market, remember to make educated and well-researched decisions and assess your available income before signing on the dotted line. As always, at Bash & Co. Sotheby’s International Realty we are here to help you navigate this process to unlock home!

Bash & Co. Sotheby’s International Realty is an innovative full-service residential real estate brokerage that leverages the latest technology to serve clients in emerging, established, and luxury neighborhoods across the Kansas City area. Follow them on Instagram here and on Facebook here.

Bash & Co. Sotheby’s International Realty is an innovative full-service residential real estate brokerage that leverages the latest technology to serve clients in emerging, established, and luxury neighborhoods across the Kansas City area. Follow them on Instagram here and on Facebook here.