• Mon. Dec 11th, 2023

    Are Rising Mortgage Rates Actually a Good Thing?

    ByEmma Wolukau-Wanambwa

    Nov 20, 2023
    Are Rising Mortgage Rates Actually a Good Thing?

    Mortgage rates have been steadily rising and are currently at record highs, causing concern among homebuyers and homeowners. However, there may be a silver lining to these high rates that many people are overlooking.

    According to The Wall Street Journal, an old fixed-rate mortgage should be seen as a valuable asset rather than a burden. The increase in interest rates over the past two years means that those with low-interest fixed-rate mortgages are actually benefiting financially.

    While it may seem counterintuitive, higher mortgage rates can increase the value of your home. Those who secured a sub-3% rate for a 30-year mortgage could see themselves tens of thousands of dollars richer. This unexpected wealth gain has already begun to change the behavior of homeowners, who are holding onto their homes instead of selling.

    Additionally, low-interest mortgages allow for more financial flexibility. Borrowers can choose to keep both debt and savings because the savings earned on investments outweigh the interest paid on the mortgage. This strategy can lead to long-term financial gains.

    However, it’s important to consider the risks associated with marking oneself to market. While homeowners may feel richer due to the increase in home value, these gains can quickly disappear, especially during a recession. Instead of splurging on luxury items, it is advisable to save and invest for the future.

    Despite the potential benefits and risks, it is clear that rising mortgage rates have had a significant impact on the housing market. The low turnover rate of homes and limited inventory have made it challenging for prospective homebuyers to find suitable properties.

    In conclusion, while rising mortgage rates may initially seem negative, they can actually be a hidden perk for those with low-interest fixed-rate mortgages. However, it is essential to approach these gains with caution and consider long-term financial strategies.