What Happens at 5 Percent?

As mortgage rates inch closer to the five percent mark, consumers are reconsidering their homebuying strategies, and experts are wondering how this will affect the market.

A new Redfin survey polled 4,000 recent and current homebuyers gauging potential reactions to rates hitting 5 percent. One conclusion drawn was that more buyers would shift their buying parameters by region and price range. Twenty-one percent say they would buy a smaller home, or buy in a different area if rates hit 5 percent, a three percent increase year-over-year. Nineteen percent of survey respondents say they would hurry up their home search to buy before rates hit that watermark, but 32 percent say they would slow down, National Mortgage News reports.

Mortgage rates reached 4 percent in late 2017, and made their way past 4.5 percent just this month. Industry projections all point to similar patterns for the remainder of 2018, with interest rates expected to reach 5 percent by the end of the year. To be sure, mortgage rates are certainly rising, but they're still near historic lows. And while both homebuyers and mortgage professionals may be concerned about the rising cost to buy a home, a tight supply of inventory for sale still remains the toughest challenge for the housing market.

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