Rising interest rates can be a bad thing for several reasons:
- Low interest rates are more beneficial for buyers than low home prices as far as affordability.
- Rising interest rates mean higher home costs. The higher interest rates mean higher monthly mortgage payments, which means people can’t afford as much home. Combine this with rising home prices and the homes people can afford to buy are now changing.
- Some people may no longer be able to afford to buy a home. With the increasing rates and home prices, some marginal buyers will be knocked out of the market.
- Less people will be able to refinance, so those homeowners that are still underwater, and have not refinanced will not be able to get the great low rates that may help them keep them in their homes.