How Interest Rates Affect Housing Market
Investment has lately become the prime consideration for almost everyone. Investing in properties has always been one of the first investment options for people due to the security it brings. It is definitely considered less of a liability than other investment options. However, with the fluctuating rates of interest, the housing sector is experiencing slight instability with respect to growth and sales.
The rate of interest, therefore, is a major factor affecting the sale of houses. People tend to purchase houses and take loans when they are offered a lower housing loan interest rate. The higher the interest rate provided, the lower the possibility of people opting for a loan to buy a house. To understand this relation, it is important to understand in detail about home loans and mortgages.
Mortgages can be fixed-rate or adjustable-rate. A fixed-rate mortgage has a fixed interest rate throughout the lifespan of the mortgage while the rate of interest in an adjustable-rate mortgage keeps changing monthly or annually, depending on the terms and conditions of the mortgage. Understanding mortgage rates can help you make prudent mortgage decisions that could benefit you a lot even in the long term.
Home loans are quite similar to mortgages where the property you desire to purchase is held as collateral to acquire finance for the task of purchasing the house. This clearly means that you are getting a loan for the very same home you want to buy. Thus, you do not have to undergo the tedious process of going through the mortgage paperwork, property valuation, etc. to file for the loan.
Financing bodies such as PNB Housing, DHFL, and HDFC offer easy home loans to eager home buyers. The interest rates on home loans are reasonable such that a regular salaried person will find it convenient, and within budget, to realize his dream of owning a home. Whenever the interest rates rise, these bodies provide long tenure loans that adjust the EMI. Therefore, the real estate purchase is not directly affected by fluctuating interest rates.