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Your Financial Life
By Transamerica / Jun 30, 2015

How Interest Rates Can Affect Housing Prices

In 2007, the U.S. was hit with an economic crisis. Home prices began to fall, the unemployment rate went up, and many people were unable to make mortgage payments. In order to boost economic activity and growth, the U.S. government and the Federal Reserve took action by lowering interest rates in order to urge people to buy homes and create businesses. The lower the interest rate, the cheaper it is for people to borrow money, encouraging spending.

A small difference in interest rates could affect your overall housing budget. The lower interest rates are, the more house you can get for your budget because you are paying less to your lender. Since interest rates are currently on the low side, if you are in the market for a new home, a mortgage might be affordable. If you already have a mortgage, consider talking to your lender about refinancing it. Before making any decisions, be sure to do your homework on both the housing and financing markets!

Should you rent or buy?