With the expectation that the Federal Reserve is on the cusp of raising interest rates, we’re hearing all sorts of predictions about how this will affect the red-hot U.S. housing market, which just registered record-high increases for 2021. Though analysts differ on just how many times the Fed will increase rates — much less how high — the impact on mortgage rates when it does act is a given.
What’s less clear, though, is whether rising rates will undermine the housing market by raising the cost of borrowing. On the face of it, they should. The higher the rate, the bigger the monthly payment — and the less potential homebuyers can afford. Housing prices consequently decline.