It seems as though mortgage interest rates have remained in the limelight well beyond the 15 minutes of allotted fame. 

For the last couple of years, mortgage interest rates fell to all-time lows. Homeowners reaped savings from refinancing, and low rates helped homebuyers with affordability.

The focus on rates continued this year, but the narrative has been different with rising rates.

Rates have moved higher this year based on three main factors:

Inflation.

The Federal Reserve increasing the Federal Funds Rate and in turn short-term interest rates.

The Federal Reserve reducing its balance sheet by selling mortgage-backed securities 

The Fed is increasing rates and reducing its balance sheet to curb inflation. Inflation is harmful to almost all aspects of the economy, but the Fed also recognizes the importance of housing. During the Great Recession, the Fed focused policy to stabilize housing. The Fed did the same thing when the economy looked fragile at the onset of the COVID-19 pandemic. 

The latest policy aimed at controlling inflation appears to have cooled the housing market, but the Fed is unwilling to see housing crash. The Fed is navigating a narrow path where inflation moderates and housing cools. This slowdown should be welcomed, because continued double-digit appreciation affects affordability and puts homeownership out of reach for many. 

I want to emphasize there’s a distinction between a slowdown and housing crash because some online outlets want to make those scenarios synonymous.

Homeownership remains one of the best ways for a family to create wealth. The Federal Reserve analyzes the wealth of a homeowner versus a renter every three years in its Survey of Consumer Finances. The disparity is astonishing. The median net worth of a homeowner is over 40 times that of a renter. Let that sink in for a moment. But for some reason, some headlines seem to paint a different picture for the future based on mortgage rates moving higher. 

I work in the mortgage industry, and even I’m exhausted from hearing so much about interest rates. There is so much more to the home buying decision. 

The knee-jerk conclusion is since rates are higher, buying a house isn’t advisable. I’m hesitant to believe that premise. Past performance might not be indicative of future results, but the fundamentals of home ownership and the American dream endure.

Food, shelter and clothing remain the three basic needs regardless of interest rates or the economy. Homes remain in demand. Moreover, changing lives necessitate moves.

From a long-term perspective, the interest rate environment remains attractive. Moreover, the rapid increases we saw at the start of the year have leveled off. 

The best advice is to contact your lender to see how today’s home prices and interest rates work within your budget. The tight labor market has pushed wages higher, which helps offset some of the effects of higher rates. Many times, restructuring debts or buying down the interest rate can result in a financial situation that works in today’s market.