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Tuesday, March 5, 2024

Why is Expert Advice Important on the Impact of Inflation on Mortgage Rates?

If you are doing business in the real estate market, you know that the world is facing two concerns currently — mortgage rates and inflation.

If you keep buying and selling properties or advise people who do, you must be interested in this topic. Inflation might have even affected your capability to save some pennies to purchase a house.

Many home buyers think they should drop their decision to buy a house right now. Have you talked to an expert about that until now? 

No, then we are here to help you. As we have been operating in the real estate industry for quite a while, we can give you expert advice regarding inflation and mortgage rates.

Should You Buy a Home During Inflation?

Inflation is an increase in prices that often leads to a decrease in purchasing capacity over time. Recently inflation has skyrocketed and broken records of 40 years. 

A home is an asset that usually increases in worth. You might have gotten a little heart attack by the prices at the petrol pump and in the superstore.

If you have money and inflation rises, you need to consider where you can place your cash to save it from a decrease in value. A house is typically considered a suitable inflation hedge. 

Your mortgage aids in balancing monthly housing expenses, and purchasing a home secures you from increasing rents.

A fixed home loan lets owners keep a large chunk of housing costs at the same rate. Yes, real estate taxes will go up, and other expenses might sneak in. But, the money you spend each month on housing stays unchanged, no matter whether the market goes up or down. This isn’t true for renters. 

Plus, the property is a tangible asset whose value mounts with time, making buying real estate a practical investment method during inflation.

The federal reserve system is striving to reduce inflation, but the data shows that the inflation rate hasn’t gone down to the expected rate.

Of course, the stock market dipped after this news came, and people started talking about the recession. The Federal Reserve System raised the federal fund rates again, declaring another spike. It designed these spikes to throw some water on an otherwise ablaze economy.

What Impacts Mortgage Rates?

Inflation doesn’t directly influence mortgage prices. But as it affects the economy and the monetary policy decisions of the central bank of UAE, it indirectly impacts mortgage rates.

CBUAE lowers or raises interest rates to control or fire up the economy, but it doesn’t set mortgage rates. 

Instead, it sets a target for the federal funds rate — the interest rate at which banks give loans to each other overnight. The federal funds rate is a short-term interest rate that, when increased, usually hikes long-term interest rates. 

The efforts of the country’s central bank don’t directly decide the up and down of mortgage rates, but their actions play a role in the intentional drop of the housing market. 

As CBUAE actively starts combating inflation, the financial markets rapidly push mortgage rates upward.

Bottom Line

Real estate experts that have spent their whole lives working in this field have analytical skills and industry knowledge. They can better explain how mortgage rates connect with inflation or if they are related.

If you are a real estate agent and want to keep track of your sales target when sales take a dip, Goyzer’s property management software can be your friend.

It is a comprehensive software that allows you to monitor all the receipts and invoices that the system generates with each completed transaction.

Jack henry
Jack henry
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