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Should You Sell Your Home if Interest Rates Are Rising?

What you'll learn: What rising rates mean for market trends and mortgage affordability.

EXPECTED READ TIME: 5 MINUTES

miniature home sitting on stack of money

February 8, 2023

When interest rates are on the rise, it is normal to wonder whether it is a good time to sell or buy a house. While rates for houses are an important consideration, they are not the deciding factor. Here are three questions to ask—and specific steps to take—to help you decide if the time is now.

1. What is happening in the real estate market?

Let us start with a concrete example: Rates reached historic lows in 2020 and have been on the rise since the Federal Reserve made a series of rate increases in an attempt to stabilize the economy. What does that mean for the housing market and home affordability?

Let data do the talking

Headlines and office chatter do not always tell the whole story. According to RedFin’s U.S. Housing Market report, in October 2022 home prices increased by 5 percent, the number of homes sold fell 29.2 percent, and the number of homes for sale rose 4.8 percent year-over-year.

Use the market to your advantage

Such market trends typically lead to one of two scenarios: a seller's market or a buyer's market. The odds are in your favor during a seller's market, when there are more buyer's than properties, sometimes leading to bidding wars and offers over your asking price. The scale tips the other direction in a buyer's market, when you will likely have to work harder to make your listing stand out to a smaller pool of buyers that have more options. Rate increases tend to eventually lead to a buyer's market, but the result is not immediate. Looming interest rate rises tend to push more buyer's into the running before home buying is out of reach.

Factor in inflation

While rates are known to fluctuate over time, the cost of everything over time goes one way: up. You should never feel rushed into selling or buying if you are not ready; however, it is important to remember that home prices typically continue to rise with the rate of inflation. Waiting out a lower rate does not always pay off.

2. Are you ready to sell?

Economic activity aside, are you truly ready to pack up your life and start a new chapter? Selling and buying are life-altering financial decisions. Consider the following to ensure you are not rushed into a decision.

Determine your motives

Why do you want to sell, really? Is it a necessity due to a career change, a nice-to-have for a growing family, or an emotional pull from experts warning, “Sell now! Before it’s too late!”? Your choices should be based on what is best for you and your family.

Run the numbers

Now for the most important question: Are you financially ready for a move, which may include a new home purchase? Estimate how much equity you have and the profit you may get from your home sale. If you will be applying for a new mortgage, check your credit score and pay down current debts to give it a boost. Create a home-buying budget including a down payment, closing costs, and other upcoming expenses.

3. How can you make home buying more affordable?

It is no secret that homebuyers’ purchase power is reduced when interest rates rise. If your plans include buying a new home, here are some ways to increase affordability in your new place.

Lean on your real estate agent

Talk to your real estate agent about various neighborhoods with characteristics similar to the ones you like best. You may find that there are plenty of options at various price points in your metropolitan area.

Consider different loan options

Talk to your lender about a variety of loan options for your home mortgage. Different loan types, down payments, and terms can change the amount you pay significantly, both month-to-month and over the life of your loan. There may also be grants and incentives available for first-time homebuyers.

Remain flexible

Think honestly about your wish list and prioritize the items there. While you may think a big backyard is essential for entertaining, ask yourself how often you will use it. Do you need a dedicated third bedroom for guests, or would it be more affordable to put them up at a local hotel or Airbnb?

Should I buy a house now?

Ultimately, the best time to buy or sell a house is a personal decision that should not be made out of haste or fear of rising rates. If you are still building your career or if your income is highly variable or uncertain, this may not be the time for you to buy. Similarly, if you are not sure where you want to live a year or two from now, it may be better to wait. But if you are ready financially, selling and buying a home can be worthwhile strategies—no matter what the market is doing.

Want the knowledge to buy and sell with confidence? Check out our free eBook library.

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Disclosures

^*Prime Rate is 6.750% as of December 12, 2025. The APR for this Home Equity Line of Credit (HELOC) is based on prime plus a margin and can change monthly. Fixed Rate Advances will be amortized over the Fixed Rate Advance Term, with the payment consisting of principal and interest. Your Annual Percentage Rate for a Fixed Rate Advance will be calculated by adding your Prime Rate, your Margin, and the Additional Fixed Rate Lock-In Margin. Your Annual Percentage Rate for a Fixed Rate Advance shall not exceed 18% and shall be equal to or greater than 6.750% for primary residences and second homes.

Annual Fee: Notwithstanding the foregoing, an annual fee of $99 will be assessed on each account anniversary.
Home equity lines of credit (HELOC) are variable rate loans and the interest rate is subject to increase after consummation of the loan on monthly basis. Closing costs range between $500 and $8,500 for credit lines of $500,000. Contact a representative for additional details.

Appraisals: PenFed will attempt to establish value via an independent method. If that method is unsuccessful, or the value is not sufficient for the amount requested, an appraisal will be required regardless of CLTV. An appraisal is always required in the following circumstances:

For all loans with a loan amount greater than $400,000.

If an appraisal is required, it must be ordered by PenFed. You will be contacted for authorization and payment prior to ordering. Appraisal fees average $550 to $850 (some run higher).

Closing Cost Credit: PenFed will pay most closing costs associated with a home equity line of credit (HELOC), which includes credit report, flood certification, settlement/closing, property ownership and encumbrances search, recording, property search, and quick close. Member is responsible for any city, county, and/or state taxes if the subject property is located in FL, LA, MD, MN, NY, TN, or VA. If an appraisal is required, the member, who is responsible for the fee whether or not the loan closes, will pay the cost.

Interest may be tax deductible, consult a tax advisor for further information regarding the tax deductibility of interest and charges.

Fixed Rate Advance Lock-In You may lock in an Annual Percentage Rate for Advances during the Draw Period. During your Draw Period, you may choose to have three separate Fixed Rate Advances locked in at any one time, with a maximum of two new Fixed Rate Advances per calendar year. Each Fixed Rate Advance must equal or exceed Ten Thousand Dollars ($10,000.00) and you may not request a Fixed Rate Advance that would cause the amount you owe to exceed your Credit Limit. The only term option for your Fixed Rate Advance is 240 months (“Fixed Rate Advance Term”). However, the term of your Fixed Rate Advance cannot exceed your Repayment Period.

Fixed Rate Advances will be amortized over the Fixed Rate Advance Term with the payment consisting of principal and interest. Your Annual Percentage Rate for a Fixed Rate Advance will be calculated by adding your Prime Rate, your Margin and the Additional Fixed Rate Lock-In Margin. Your Annual Percentage Rate for a Fixed Rate Advance shall not exceed 18% and shall be equal to or greater than 6.750% for primary residences and second homes.

Property Insurance: Property insurance is required.

Multiple PenFed Loans: Multiple PenFed Equity loans and HELOCs are available as long as the member and collateral qualify (except Texas). For Equity loans and HELOCs the total indebtedness cannot exceed $500,000 for all PenFed Equity and HELOCs combined.

PenFed does not lend on:

Mobile homes
Co-ops or time-shares
Properties that are currently listed on the market for sale
Commercial property or property used for commercial purposes, even if a residence is part of the property
Undeveloped property (land only)
Properties with more than 4 units

Properties that are currently under major construction/renovations: Property must be fully livable, with no safety issues. (Examples: no missing rails from stairs/decks, no open walls with wires showing, missing kitchen appliances/counters, missing bath fixtures or unfinished pool).

Additional limitations may apply

Home Equity Line of Credit:

This Account has a Draw Period of 10 years, followed by a repayment period of 20 years.
If only minimum payments are made during the draw period, the loan balance will not decrease.
In Texas, the maximum CLTV available is 80% on owner occupied properties. Additional restrictions apply in Texas, so please ask a representative for details.
In all other states, the maximum CLTV is 85% on owner occupied properties and second homes. Additional restrictions or requirements may apply based on application characteristics.
Property type of Condo has a maximum CLTV of 80%.
The maximum CLTV available is dependent on credit qualification.
Rates vary depending on owner occupancy and CLTV and other loan criteria.

Minimum Loan Amount Requirements in all States:

For an owner occupied property or second home the minimum loan amount is $25,000 and the maximum amount is $500,000 with a CLTV of 85% or less of the fair market value.

Other terms and conditions apply; call 844-918-4307 to speak with a representative for details. All rates and offers are subject to change without notice. To receive advertised product, you must become a member of PenFed.