Rising Interest Rates: How They Affect Home Affordability
- Scott Sweeney
- Oct 10
- 3 min read
Interest rates have always played a major role in the real estate market — influencing everything from home prices to buyer demand. As rates continue to fluctuate in 2025, understanding how they impact affordability is crucial for both buyers and sellers looking to make smart moves.
💰 What Rising Rates Mean for Buyers
When interest rates rise, the cost of borrowing money increases. Even a small bump — say from 6% to 7% — can significantly change what you can afford. For example, on a $500,000 home, that 1% difference could add several hundred dollars to your monthly mortgage payment. Over time, that adds up to tens of thousands of dollars.
The takeaway? Your budget might stretch less than it did a year ago, but there are still ways to stay competitive:
Explore rate buydowns or temporary rate reductions offered by some lenders.
Shop for loan programs—FHA, VA, and other options may offer lower rates.
Work with a knowledgeable agent who can negotiate credits or incentives to offset costs.
🏠 How Sellers Are Affected
Higher rates can slow buyer demand since fewer people qualify for the same home price. This can lead to slightly longer market times or more negotiation on pricing. However, in areas with strong job growth or limited inventory (like much of Northern California), homes are still selling — just at a more balanced pace.
Pro Tip for Sellers: Position your home strategically. Pricing right from the start and making minor updates can help your property stand out even when rates are higher.
📊 The Bigger Picture
Despite rising rates, real estate remains one of the most reliable ways to build long-term wealth. As rents continue to climb and inventory stays tight, many buyers are realizing that waiting could cost more in the long run — especially if home prices and rates both rise further.
In short:
Rising rates reduce buying power but don’t erase opportunity.
Strategic timing and smart negotiation can still create great deals.
Real estate remains a strong hedge against inflation and volatility.
💡 Final Thought
Whether you’re buying or selling, today’s market requires strategy, not panic. With the right guidance, you can still make a smart move — even in a higher-rate environment.
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About Scott Sweeney
SweeneySells
Full Time Realtor 13 Years +
Over 100 Families Served
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Buying & Listing Specialist
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CSUS Business & Marketing Graduate 2006
With quickly serving over a 100 families, Scott Sweeney has become a top 5% producing Realtor in the greater Sacramento area who has helped clients from the Bay Area to South Lake Tahoe. Scott has a Bachelor Of Science in Business Administration, with a concentration in Marketing from CSUS. His education, and extensive background in the hospitality, marketing, and real estate industries, have helped Scott to become one of the leading, and most sought after agents in the area.
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