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Why Should We Be Concerned About Rising Interest Rates?

For every 1% increase in rates - a buyer loses about $30,000 of buying power. That loss of buying power makes it harder to pay 'up' for a house. The reason for the lost borrowing power is that income is fixed. As interest rates go up, the payment goes up, so the same borrowing power on a relative basis forces the consumer to buy a smaller house to maintain their target payment.


Said differently, when interest rates go up, the money flow tends to go toward the higher payment. When interest rates go down, the money flow tends to go toward the higher purchase price.



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