09/16/2026
News of the day: The Feds just raised interest rates today. It's a move intended to slow inflation. In real estate, the obvious concern that jumps to mind is mortgage rates. It can be scary. What's the deal? (There's a TL/DR at the bottom if this is too detailed)
It helps to know how mortgage rates work. The conventional wisdom isn't completely wrong, but the reasoning behind it IS often mistaken.
What is often COMPLETELY wrong is how people react to all of this. Let's look at a few things:
First, mortgage rates are primarily tied to treasury bills. That's separate, but not unrelated to the prime rate. It's more of a trickle-down effect. The prime affects t-bills, which then affect mortgage rates.
So yes, the prime going up does mean that mortgage rates will go up, but not directly. There can be a lag, or even a difference in how much they change, since both t-bills and mortgages are affected by other factors such as demand.
So let's assume (probably correctly) that mortgage rates are going to go up. There are a few strategies to deal with it if you're looking for a home:
1) Wait it out. This is the most common approach, but it misses a lot of opportunities. There's a saying that conventional wisdom is seldom either. That's true here. If you're otherwise ready, there are a couple of different strategies that can work:
2) Lock your rate TODAY. If you're ready to go, get with a good lender (I can suggest some excellent folks to work with if you'd like) and get pre-approved and a rate lock. Getting pre-approved usually only takes a few minutes. You'll usually get a 30-day rate lock from a reputable lender, and that buys you time to find a home. You can request a longer lock with some lenders. There may be a fee, but you then get a plannable, stable rate to predict your payments when you find that great (I won't say perfect) home.
3) While the last strategy is very good, what happens if the rates are ALREADY higher than you like (be honest: ANY rate is higher than we all like)? The short answer: DON'T WORRY ABOUT IT. Here's why:
A) There's a saying that you're married to your mortgage but only dating your interest rate. You can get your home even at the higher rate. However, when rates drop, you can refinance to the lower rate. Some lenders even have something called "re-casting" which allows you to adjust the rate with some payment made strictly to your principle. Essentially, you're investing in yourself.
Additionally, there's an opportunity cost: if you get your home now, the appreciation of the home will usually outstrip the additional interest cost during the time of higher rates. If you wait it out (strategy 1 outlined above), you miss out on that gain.
B) Because of the first strategy I mentioned, demand usually drops during times of higher interest. It will recover somewhat after emotions settle down and people get used to the new rate, but there's usually an opportunity. When demand goes down, the increase in home prices will often slow, or home prices might even drop slightly. Earlier I mentioned you're only dating your interest rate. The flip side is that the home price is forever. Whatever price you buy the home will never change. So if prices are softer during higher rates, you can take advantage of that for a better long-term gain.
TL/DR: There are three strategies to deal with higher interest rates: 1: Wait it out; 2: Lock your rate NOW; 3: Use the opportunity for long-term gain.
QUESTIONS? Reach out!
