Rising interest rates affect home affordability for buyers by increasing the monthly mortgage payment Despite what it may seem, buying when interest rates rise has benefits. Lower buyer competition causes lower home sales prices, opens up more options for buyers and can reduce the risk of buyers. The ideal is to buy when both interest rates and home prices are low. If that's not possible, calculate the short- and long-term costs of a lower interest rate compared to a lower purchase price.

When the numbers make more sense, make your move. The price of the home, the down payment and the interest rate will affect the amount of your monthly mortgage payment. If you buy a more expensive home, your monthly payment will be higher. And higher interest rates will also increase your monthly payment.

Nobody knows for sure, but Marr believes that by the end of summer, higher rates could finally ease competition. Moving away from the market can also give you time to solidify your financial position, whether it's saving more for a down payment, improving your credit score, or paying off your debts. Rather than focusing on how much rates have risen, it may be better to think that current rates are not a very good thing. So what's more important: the price of the house or your interest rate? Let's consider a scenario in which a buyer opts for a lower interest rate and a higher home price.

**Mortgage rates** currently average 4.67%, up from just 3.22% at the beginning of the year, according to Freddie Mac. And the opposite is also true: when mortgage rates are low, buyers have more money to spend, so home prices will start to rise. When mortgage rates remain fairly stable or fall, it's possible to get a good idea of your purchasing power months before making an offer on a home. If the interest rate on your current home is significantly higher than current rates, ask potential mortgage bankers how much it would cost to modify your loan.

The price of a home is the total amount you pay for the house and the interest rate is the amount you are charged to apply for a mortgage. Basically, the problem of high initial interest rates can be mitigated in the future if rates fall. Under this type of agreement, a seller buys the interest rate that a homebuyer will have to pay in the first few years of their mortgage. Monthly payments are increasingly out of reach for many potential homebuyers and some sellers are hesitant to place bets, unwilling to face a real estate environment where you get less housing for your money, with mortgage rates close to 7%.

However, if you look at interest rates from a historical perspective, you can see that rates are still low by comparison. For example, the initial rates on adjustable-rate mortgages tend to be lower than those on a 30-year fixed-rate loan. For example, in a 2-to-1 buying situation, the buyer's interest rate will be 2% below the contract rate for the first year.