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Most people believe high-interest rates and low mortgage applications are bad for homebuyers. However, these conditions are good for everyone involved. Here’s why.
The benefits of high-interest rates when you’re buying a home
It might feel counterintuitive to be excited about seeing interest rates rise, but there are a few reasons why it’s so beneficial for you as a homebuyer.
Reduced competition
When the interest rates on mortgages are high, it makes it much harder for other people to afford a home. This means you have a much better chance of getting your dream home for a price you can afford instead of getting caught in a bidding war that takes you out of your budget.
Lenders are more flexible with their approvals
Lenders take a risk every time they approve a new mortgage, and low-interest rates give the lender less of a safety net for recouping their costs. However, when interest rates rise, the lender has more opportunity to profit on your mortgage and, thus, is more willing to take a gamble on your application.
You’ll have more opportunities to get money for home improvements
Suppose you already own a home and have been waiting for the right time to make some improvements. In that case, you are more likely to get personal loans for home improvement approved now for the same reasons potential homeowners benefit from the rising interest rates. If you can handle your loans responsibly and pay them off on time, you should expect a better chance of approval now than before.
The benefits of low mortgage applications as a homebuyer
Low mortgage applications don’t just mean a better chance of getting approved for the home of your dreams – they can also mean a lower cost for you.
Low mortgage applications lead to more affordable homes for all homebuyers
When mortgage applications are low, lenders have more opportunities to offer lower rates than they would if there were higher demand for mortgages. This means that even though more expensive homes may be available, they will be more affordable to those who want to purchase them.
Low mortgage applications lead to better home financing options for all buyers
When more qualified buyers are looking to purchase homes, lenders are more likely to offer financing products tailored specifically for those buyers. This means that no matter your credit score, you will have a chance to purchase a home.
Low mortgage applications lead to a more efficient market
When fewer buyers are in the market, the housing market is more likely to be stable, and prices will not change as quickly. This means that you are more likely to find the home you have been searching for in a timely manner.
The bottom line
High-interest rates and low mortgage applications are beneficial to all parties involved. If you’re looking to buy a home, now is the perfect time to reach out to your real estate agent and get the process started.
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