Q: I have been hearing that interest rates have risen. How will this affect the sale of my home?

A: Interest rates have gone up, and there has been some suggestion that the Feds will raise them again. As the interest rates rise, the amount of money that a buyer can spend goes down.

For every percent that the mortgage rates rise, that translates to a monthly payment of $200 more for every $100,000 that is borrowed. If a person borrows $500,000, then the monthly payment is $200 more.

You may wonder how this will affect the market, since it seems that is not much money. The issue is that it reduces how much people will feel comfortable borrowing, and thus prices will swing lower.

If rates climb consistently, then it’s only a matter of time before the prices and buyers weaken. Also, with the new tax laws, the higher interest rates are not being offset by deductions, since there is now a limit on how much you can deduct.

So it would be wise to keep a watchful eye on the federal government indicators over the coming months.

Please send your real estate-related questions to jambron@halstead.com.