If you're in the market to buy a home, you're probably already aware that interest rates have risen considerably this year. At over 7% for a 30-year-fixed mortgage loan, interest rates have not been this high since April 2002.

For buyers in New York City, already staring down some of the most expensive properties in the country, high interest rates can make the dream of home ownership look increasingly out of reach. So, why are rates so high now? And what does it mean for you? Let's dig in.

Why Are Rates So High?

Just one year ago, the average rate for a 30-year-fixed loan was 3.14%, and throughout 2020 some lucky buyers even managed to lock in rates around 2.5% when the Federal Reserve cut rates to prevent the country from slipping into a recession during the pandemic lockdown.

Think back to 2020 for a moment. (In 2020 and 2021, with low borrowing costs, lots of free time, and few places to go, people got very interested in buying homes and other big-ticket items. Demand for houses and cars soared, and buyers found themselves in bidding wars. Seeing skyrocketing demand and prices, the Federal Reserve decided to raise interest rates to tamp down inflation.

What Does This Mean for You?

For a prospective homeowner, rates at around 7% mean that purchasing a $400,000 home will cost more than twice as much in interest as it would have paid just one year earlier—that's about $760 more each month on a mortgage payment.

Buying a home may no longer seem like a great idea for many homeowners. As a result—just like the Fed hoped would happen—prices are starting to come down. This means that if you can pay cash for your purchase, now is a fantastic time to buy.

But even if you can't pay cash, it's still important to remember that there's a very good chance that rates won't get a whole lot higher. It's also worth remembering that the 2.5% loans a few people got last year were the anomaly, not the norm, and that for decades homebuyers considered 5% and 6% rates to be quite good.

Don't Try to Figure it Out for Yourself

If you're hoping to buy a home in a volatile and confusing market, you need someone who can help you navigate the process. Attorney Melvin Monachan is an experienced New York City real estate lawyer and can answer your questions. Call today at 347-389-1682 or schedule a consultation online.