You might be thinking that we have lost our marbles for even suggesting that there could be benefits of buying houses in a market where the interest rates are higher. We’re not saying it’s the right market for every person, but there actually are some benefits of purchasing your dream home in a market where interest rates are high. So stick around until the end.

While rising interest rates certainly affect the overall affordability, there actually are a few advantages of a market that’s cooling.

  • High interest rates drive house prices down
  • There is less competition
  • There is less risk for buyers

Let’s unpack all three a bit.

Lower housing prices

Interest rates are rising because inflation is high. In order to combat this, the Reserve Bank (and therefore the banks) raise the interest rates for home loans. This is essentially to put a damper on people’s spending habits. By raising the interest rates, less people buy homes, which eventually will help cool down the market and thereby get inflation back to a more normal level. Basically, it’s in order to prevent a total collapse of the economy.

But, high interest rates also drive house prices down. Unless you have been living under a rock you know the property market has been exceptionally crazy over the last couple of years – supply and demand has been out of control which led to property prices skyrocketing. But, now house prices are coming back down – and they are coming down fast.

This means that you might just be able to snag your dream home for a much lower price than just a year ago. Yes, your mortgage repayments will be higher, but the lower house price might just be able to even it out.

Less competition

There is no denying it, higher interest rates means fewer buyers. The higher interest rates take out some buyers that simply cannot afford the higher repayments. But, this also means that when you do find your dream home, there will be much less competition – heck, you might just be the only one interested. This gives you as a buyer the upper hand. We are also starting to see houses being on the market for longer – and let’s face it, the longer a house has been on the market, the more keen the owners are to sell, which, once again, gives you the upper hand.

Less buyer risk

What happens when there is a massive demand and limited supply on the property market? A lot of buyers are waiving offer conditions. Why? Because offers with fewer conditions give you a better chance of being selected by the seller.

At the moment you most likely don’t need to do this in order to get your dream home. And let’s face it, for most buyers it is better to include a condition that allows them to back out of buying the house if the terms of the clause aren’t met. This prevents you from losing your deposit if you decide not to buy the property after making an offer.

Some buyers also decided that a builder’s report/inspection was something that they could do without in hopes to be the lucky chosen one by the seller. However, purchasing a home without a builder’s report involves a lot of unknowns. For instance, it would be a real bummer moving into a house only to discover that the roof is leaking and needs replacing within two years. That’s quite a big expense, that probably would have been nice to know about beforehand.

So should I buy now then?

Well, that depends on your unique financial situation. For some buyers now is a really opportune time to buy, while other buyers need to hold their horses and wait for interest rates to come back down.

We always recommend that you talk to a financial advisor so you can get advice tailored to your specific financial situation – don’t make any rash decisions before consulting a professional.


Everything shared in this blog post is the opinions of The Mortgage Whanau, and it is general advice. Furthermore, the examples used in this blog post are fictional and are only meant to illustrate a point. For tailored advice, you need to talk to a mortgage broker. You can book a strategy session with us here.