How Interest Rate Spikes Impact Real Estate Investing


The last few years have been anything but normal. The recent volatility of mortgage interest rates has understandably made many buyers skittish. Today we’ll share how interest rate spikes impact real estate investing, especially in Orlando and the surrounding areas. With careful planning and the right team of experts, you can still get reasonable rates and favorable ROIs even with wild markets.

Buying during Interest Rate Volatility
Many buyers have gotten sticker shock on housing pricing for both primary residences and investment property. Yes, the costs of properties skyrocketed as the demand far outweighed the supply of available houses on the market. But now, interest rates have begun swinging wildly – at one point 0.75% within a matter of three days. (For reference, usually, we’ll see that big of a shift over the course of a year.)

So, locking in the best rate can literally mean the difference of hundreds or thousands of dollars for monthly payments. Our advice: lock in early and make sure your lender can do a float-down option at no cost. But be aware that you can only do one float down, so choose your timing wisely with your lender’s advice.

How Does Inflation Affect Interest Rates?
At the time of this writing, inflation has hit a 22-year high in the U.S. Higher inflation naturally drives up interest rates on mortgages (among other things). In a way, we see this as a good sign of us moving past COVID, of getting close to normal.

Why? The Fed suppressed interest rates to near 0% during the pandemic to stabilize the economy. They also printed more money, which some forget was never “free.” The larger supply of cash meant the dollar had less value. So, inflation happened. To cool that inflation, the Fed raised interest rates. Hopefully, the worst inflation adjustments are finished, although we may see a few more tweaks.

Another Housing Market Crash?
2008 still feels fresh in a lot of buyers’ minds. And while no one can say for certain, many experts don’t expect to see another housing crisis in 2022.

This is mainly because lending laws have changed drastically as a result of the crash in 2008. So even if housing prices keep rising with more demand than supply, people won’t get approved for mortgages they can’t afford.

Florida Investment Property Outlooks
The good news for Florida real estate investors? Monthly rent rates still outpace mortgage payments. So even with higher mortgage payments due to higher interest rates, you can still make a profit on your properties. Plus, you can always refinance to better rates in the future.

In addition, the positive outlook for Florida investment property continues. The Motley Fool recently named the central Florida area one of the top places nationally to invest in rental properties. Roofstock, who named Orlando the best place to buy rental property in 2021, sees this trend continuing throughout 2022. Both cited housing prices, growing populations, and hot job markets.

Have more questions or need advice on lenders? We’re always happy to help fellow investors find the right resources in the central Florida area. Use our online form to reach out, or just give us a call at 321-947-7653.