A.: For the Prospective Seller: A small increase in interest rates should not have a great effect on the sale of your property. Hopefully, it will propel buyers who have been procrastinating to move more quickly towards a purchase to take advantage of the still modest interest rates.
If they continue to climb, then there might be a more dramatic effect. First of all, a larger rise in rates will affect the purchasing power of potential buyers. Additionally, it could induce a recession in the real estate market because people might choose renting over buying.
The best way to gauge your need to be concerned is to monitor the change in rates by the federal government. If the indication is that the rates will continue to rise, then a faster sale may benefit you.
For the Prospective Buyer: If you are buying with a mortgage, a small increase won’t have a major effect; however, if the rates rise continuously, then you may be priced out of your ideal purchase. Because your monthly payments will go up, you won’t be able to afford the same property.
This is especially true with co-ops, where board approval relies heavily on your debt-to-income ratio. If there is a significant hike, you might consider an adjustable mortgage, which starts off lower than a conventional mortgage and then increases slowly.
Alternatively, you may be forced to rent. Keep a close eye on the federal government indicators.
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