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How do interest rates affect house prices?

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0 2022-12-22T13:06:19+00:00
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Hey, 

I have been intrigued to know what factors affect the affordability of real estate in India. Local real estate trends, the housing market, the home's condition, age, interest rate, location and property size impact the price. I will tell you how do interest rates affect house prices. The reason might surprise you.

Click here to get your legal woes resolved by experts at NoBroker. Get instant loan disbursal with minimal documentation via NoBroker  Check your estimated EMI for home loan using NoBroker Home Loan EMI estimate calculator How does interest rate affect housing price?

The interest rate of banks is decided based on the Reserve Bank of India’s Repo rate (the rate at which it lends money to banks). If the repo rate is high, then the banks increase their lending interest rate and vice versa. 

I read a report where real estate expert Vivek Rathi has given an example: If the home loan interest rate is increased by 1 percent then the affordability of the house is reduced by 7.4%. An increase in interest rate means the monthly EMI for new and existing borrowers will become pricier. High-interest rates along with skyrocketing property prices will put pressure on the buyer. 

  How do mortgage interest rates affect the price of housing?

There is an inverse relationship between mortgage interest rates and the price of housing. High Mortgage interest rates will lead to banks making mortgage financing more expensive. It will increase the costs of buying a house i.e. the buyer will need more equity to finance your mortgage/loan. Consequently, this will lead to the demand for houses falling. 

This is all from my end on how do interest rates affect house prices.

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