How to navigate rising interest rates

Northern Wasatch Association of Realtors Advice

Stephanie Taylor

            A swift rise in interest rates has some buyers wondering how the higher borrowing costs will affect the housing market.

            Although Freddie Mac reported that interest rates in April surpassed 5% for the first time since 2011, the mortgage giant also said it expects the “single-family purchase market will remain solid in 2022 despite increases in mortgage rates.”

The organization’s April 18 Quarterly Forecast report predicts that although demand and prices will moderate somewhat, there will continue to be substantial housing demand. Freddie Mac also expects the 30-year fixed-rate mortgage to average 4.6% in 2022 and 5% in 2023.

 “While the sharp increase in mortgage rates will lead to a precipitous drop in refinance originations in 2022, demand for housing continues to remain solid, propelled by the large swath of first-time homebuyers and prospective purchasers looking to lock in a mortgage rate before they increase further,” said Sam Khater, Freddie Mac’s chief economist, in a press release.

            For buyers who are looking to get in the market, here are some tips for navigating a housing market with higher interest rates:

Shop for a mortgage

            Shopping for a mortgage is important at any time, but it’s particularly imperative as borrowing costs rise. You can save thousands on a mortgage simply by shopping around.

Make sure to talk to multiple lenders and get quotes from each. Compare the rates and fees on the Loan Estimate forms received from each lender. The Consumer Financial Protection Bureau provides a number of resources at that will help you compare the loan offers.

 Another way to save is to ask about options for different mortgage terms. For example, rates on 15-year mortgages are often lower than those for 30-year loans. An adjustable-rate mortgage or ARM may also be cheaper if you’ll only be in the home for a certain term, such as three, five or seven years.

Contact your lender regularly

            Interest rates often fluctuate so you’ll want to regularly communicate with your lender about changes in rates. If your lender reports on favorable pricing or a drop in rates on a particular day, be ready to lock in your rate since the market can change quickly.

            You’ll also want to talk to your lender about whether a rise in rates will affect your qualification and the amount they’re willing to lend to you.

            Finally, ask your lender if there are any special mortgage programs, such as ones that don’t require mortgage insurance, that could help you reduce your monthly payment.

Get in back-up position

            Even with the recent rise in mortgage rates, buyers are still navigating a very competitive housing market because of the housing shortage. One strategy that may help you secure a home is to be a back-up buyer, meaning you would be in line to purchase the home should the current buyer back out before closing.

            As interest rates rise, this strategy may be effective as more buyers may back out because of higher borrowing costs. Some may also realize they can no longer afford the home.

            If the house you love goes to another buyer, ask if the seller is accepting back-up offers. If they are, work with your Realtor to secure a back-up contract and be ready to step in if the original buyer cancels.

Consider all the factors

            Even though interest rates are higher than their record lows of the last two years, rates at 5% are still low from a historic perspective. And the difference between payments may be lower than you think. For example, assuming a 20% down payment, the monthly payment for the median-priced home in Weber County increases by about $200 when going from a rate of 4% to 5%.

            You’ll also want to factor in the costs of waiting to buy. These include higher home and rent prices in the future, possible increases in interest rates, and the missed opportunity to build home equity.  

For more tips about buying in today’s market, contact a local Northern Wasatch Realtor. Find one who specializes in your area by searching the online directory at