Does higher mortgage rates lower the chance of a housing recovery?

In today’s NASDAQ News some analysts are saying that the increase in mortgage interest rates over the past few weeks will hinder the housing recovery as it will make it less lucrative for people to buy.

For what it’s worth, I don’t agree.

I feel the decision to buy a new home is more often than not an emotional one, not a financial one.  People buy a new home because they want it, not because they can get a lower interest rate.

What will happen is that people will qualify for slightly less home since interest rates are directly related to mortgage payment which is directly related to debt-to-income ratios.

What higher interest rates will do is slow the number of mortgage refinances.

Hopefully, we’re near or at rock-bottom in the housing market.  Foreclosures are down and interest rates are returning to a “healthy” level where it has been during the most abundant times in our economic history.

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