Factors of Increasing Interest Rates in How Often You Move

When a person purchases a new residence, he will have to take out a new loan to do so. When the person takes out the new loan, the rate he receives on it will be affected by a number of different factors, including how much lenders are charging borrowers for loans in the wider economy. An increase in this rate may push a person to not change residences, so as to maintain his current mortgage.

Interest Rates

Interest rates, considered in aggregate, shift constantly based on a variety of factors. Although the rates that individual lenders offer individual borrowers will depend on the lender's policies and the borrower's credit worthiness, an average rate of interest can be measured using an index. A rise in interest rates can be precipitated by a number of things, including a rise in inflation, or in concerns about the economy, which could lead to more defaults.

Mortgages

When a person sells one residence and purchases another one, he must likely take out a new loan to finance the purchase of the new place. If the interest rate has risen since he took out his last loan, he may not have a strong motivation to change residences, as he will likely have to give up his current rate of interest, which will be lower than the loan that he receives on his new one.

Selling A House

In addition, when a person changes residences, he will have to sell his old residence. This may be difficult to do if the interest rate rises, as when the interest rate rises, the demand for houses contracts. This is because people are more likely to stay in their current residence or to continue renting. This may prohibit a person from moving if he cannot sell his house for the price he would like.

Renting vs. Buying

If a person wishes to rent rather than buy, then his decision to move will not be affected as much by changes in the interest rate. This is because, when a person rents, he does not have to take out a mortgage, so he does not have to worry about the interest rates for these loans. However, if the house market contracts due to higher interest rates, the demand for rentals may expand, leading to higher prices.