What does that mean for you if you’re buying a home now or plan to buy one soon?

First, don’t panic.

When you’re buying a home, the mortgage rate matters. However, you shouldn’t focus on the rate and let that scare you and stop searching for the home.

The average rate on the 30-year fixed-rate mortgage rose to average 4.5% in February, which is about half percent from 2017. This increase doesn’t have a major impact on the monthly payment. On a 30-year loan for $200,000, the monthly payment would be about $59 more at a 4.5% interest rate than at a 4% interest rate.

What to do when rates rise

Lock your mortgage rate. If you close the home loan by the specified date, the rate can’t go up. You can use this tactic after the lender has approved you for a mortgage for a specific house.

Buy “points” to reduce the interest rate. If you have the cash, you can pay for discount points — in effect, prepaying some of the interest in exchange for a lower mortgage rate.

Revise your price range. A higher mortgage rate brings higher monthly payments. Rising rates might force you to adjust your home-price range downward.

The higher interest rates are the ‘new normal’. Talk to any housing economist about mortgage rates, and you’ll hear that rates have been abnormally low in the decade since the housing crash. I remember purchasing my first home for 9% interest rates. The rates we’re looking at today are still, pretty low.

People have gotten kind of lulled into these low rates, and a lot of people think this is normal, but this is not normal.


We are returning to normal, and it is going to be a painful process, but it is happening.