How Does an Interest Rate Increase Affect My Buying Opportunities?

Rising interest rates have both direct and indirect impacts on your ability to purchase a home. It influences not only how much you can borrow but also how competition on the housing market evolves. Below, we outline the main effects and how you can adapt to them.

Borrow less, higher monthly costs

A higher mortgage interest rate means your monthly payments will increase, directly impacting your borrowing capacity. For example, if you could borrow € 400,000 with a 1% interest rate, this amount could drop by € 50,000 with a 4% interest rate. This makes it harder to place the same bid, limiting your options.

Less competition, reduced pressure

The higher interest rate not only reduces your borrowing capacity but also that of other buyers. This often results in fewer overbids, quieter viewings, and more room for negotiation. For many buyers, especially first-time buyers, this creates an opportunity to secure a property without facing extreme competition.

Scarcity keeps prices high

Despite the decline in purchasing power, the housing shortage remains a significant issue. Many homeowners are staying in their current homes because a new mortgage with a higher interest rate would be more expensive. This “locked-in effect” reduces market supply, keeping house prices high, even with less competition.

How can you improve your chances?

Set a realistic budget: Carefully calculate what you can borrow with the higher interest rate and focus on homes within that budget.
Increase your down payment: Use savings or other resources to partly offset the limitations of lower borrowing capacity.
Take advantage of reduced competition: A less competitive market offers opportunities for strategic bidding and negotiation.
Consider alternative locations: Look in areas with lower prices and less competition to improve your chances.

Rising interest rates limit your borrowing capacity but also present opportunities in a less competitive market. By setting a realistic budget, bidding strategically, and staying flexible, you can successfully purchase a home even in a higher interest rate environment. Fill in the address of your dream home and find out what the optimal bid is for only € 79.