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Interest Rates for Home Loans: What Moves Will They Make and Should You Wait or Act Now?

May 4, 2023

As a real estate broker, staying informed about interest rates for home loans is crucial. Interest rates can impact the affordability of a home, the size of a mortgage payment, and the overall cost of owning a home. In this article, we’ll discuss what moves interest rates for home loans will make in the short and long terms, as well as the pros and cons of waiting and seeing what happens. Then, based on the facts, we’ll provide sound advice for buyers and sellers during the busy hot summer months ahead.

Factors That Influence Interest Rates for Home Loans

Before diving into what moves interest rates will make, let’s discuss the factors influencing them. Interest rates for home loans are impacted by a variety of economic factors, including inflation, economic growth, and global events. Here are some of the critical factors to keep in mind:

  • Inflation: Inflation measures the overall price increase over time. When inflation is high, interest rates tend to be higher as well. Lenders must charge higher interest rates to keep up with inflation and protect their profits.
  • Economic Growth: Interest rates tend to be higher when the economy grows. This is because increased economic activity can lead to higher inflation, which, as we just discussed, leads to higher interest rates.
  • Global Events: Global events, such as changes in trade policies or geopolitical tensions, can impact interest rates for home loans. For example, there is uncertainty in the global economy. In that case, investors may seek out safe havens like U.S. Treasury bonds, which can drive down interest rates for home loans.

Short-Term Moves in Interest Rates for Home Loans

In the short term, interest rates for home loans are influenced by a variety of factors, including the Federal Reserve’s monetary policy, inflation expectations, and the state of the economy. For example, the Federal Reserve kept interest rates low to support economic growth and combat the impacts of the COVID-19 pandemic. However, as the economy recovered, the Federal Reserve began raising interest rates to prevent inflation from getting out of control.

Additionally, inflation rose recently due to increased demand for goods and services as the economy reopened. This leads to higher interest rates in the short term as lenders adjust to higher inflation expectations.

Long-Term Moves in Interest Rates for Home Loans

In the long term, interest rates for home loans are influenced by a variety of factors, including demographic trends, global economic trends, and government policies. One key factor to keep in mind is the aging of the population. As baby boomers retire and age, there will be fewer workers in the economy, which could lead to slower economic growth and lower interest rates in the long term.

Additionally, global economic trends can impact interest rates for home loans. For example, suppose the global economy experiences a recession. In that case, interest rates may fall as investors seek safe havens like U.S. Treasury bonds.

Pros and Cons of Waiting and Seeing

Given the uncertain nature of interest rates for home loans, it’s natural to wonder whether it’s best to wait and see what happens or act now. Here are some of the pros and cons of waiting and seeing:


  • You can secure a lower interest rate if rates fall.
  • You’ll have more time to save up for a down payment and improve your credit score.


  • Interest rates may rise in the future, making homes less affordable.
  • You may miss out on the perfect home if you wait too long.
  • You may pay more in rent if you continue to wait.

Advice for Buyers and Sellers

Based on the factors that influence interest rates for home loans, while rising interest rates might not be the ideal scenario for buyers and sellers alike, it’s important to remember that there are always pros and cons to any situation. In the short term, higher interest rates make it more difficult for buyers to afford a home, leading to a decrease in demand and a slowdown in the housing market. However, rising interest rates could benefit the housing market in the long term by keeping prices in check and preventing a potential housing bubble.

So, what should buyers and sellers do in this uncertain market? Ultimately, the decision will depend on individual circumstances, such as financial goals, timing, and risk tolerance. However, there are a few general tips that can help guide buyers and sellers in making a sound decision:

  1. Keep an eye on interest rates: Interest rates constantly fluctuate, so staying current on the latest trends and forecasts is essential. Buyers should get pre-approved for a mortgage sooner rather than later to lock in a lower interest rate. Sellers should also know interest rate trends and adjust their pricing strategy accordingly.
  2. Consider your financial goals: Buyers and sellers should consider their financial goals and determine whether they are in a position to buy or sell in the current market. For example, if purchasing a home is a long-term goal and interest rates are expected to rise significantly, it might be worth waiting to save up a larger down payment or improve credit scores. On the other hand, if selling a home is a top priority and interest rates are low, it might be an excellent time to list the property and take advantage of the favorable market conditions.
  3. Consult with a real estate professional: Real estate professionals can provide valuable insight and guidance on the current market conditions and how they may impact individual buyers and sellers. They can also offer advice on pricing strategies, negotiating tactics, and other aspects of the buying or selling process.


The housing market is constantly changing, and interest rates play a significant role in the market’s performance. While rising interest rates might create some uncertainty and volatility in the short term, they can also provide stability and prevent a potential housing bubble in the long term. Buyers and sellers should stay informed, consider their financial goals, and consult a real estate professional to make the best decision for their unique situation.

If you’re in the market for a new home or looking to sell your current one, don’t hesitate to contact TWINCITIES.REALESTATE. Our experienced team of real estate agents can provide you with the guidance and support you need to make informed decisions about your real estate transaction. Whether you’re a first-time homebuyer or a seasoned investor, we can help you navigate the ever-changing real estate market and find the perfect property for your needs. Contact Us today to schedule a consultation and take the first step toward achieving your real estate goals.

Jerry Arguello