How Interest Rates Affect Your Buying Power

Written by Gillian Gooch • September 4, 2025

When interest rates change, so does your buying power. Even a 1% shift in rates can make a big difference in how much home you can comfortably afford each month.

What Is Buying Power?

Buying power is simply the amount of home you can purchase based on your monthly budget, loan terms, and interest rate. The higher the rate, the less house you can afford for the same monthly payment.

A Simple Example

Let’s say you’re shopping with a $2,000 monthly mortgage budget (not including taxes and insurance).

• At 5% interest → You might qualify for a loan around $375,000.

• At 6% interest → That same payment now only buys about $335,000.

• At 7% interest → Your buying power drops again to roughly $300,000.

That’s a $75,000 difference in home price just from interest rates alone!

Why This Matters for Buyers

• Waiting can shrink your options if rates rise.

• Acting now can lock in your budget before prices increase further.

• You can refinance later to lower your payment — but you can’t undo the price you pay for the home.

Tips to Maximize Buying Power

• Get pre-approved early so you know your real budget.

• Work with a trusted lender who can explain loan options like buydowns or adjustable-rate mortgages.

• Prioritize needs vs. wants so you’re ready to act quickly when the right home appears.

The Bottom Line

Interest rates aren’t just numbers — they directly impact the home you can afford. The key is to shop smart, trust the process, and remember that owning a home today puts you in control of your future equity, no matter what rates do next.

In faith and service,
Gillian Gooch, Realtor®
Gillian Gooch Properties