Why interest rates move home prices

Home prices and interest rates are closely linked.

The monthly cost

Most buyers borrow. The monthly cost of a loan depends on the interest rate. When rates go up, the same loan costs more each month.

What buyers can afford

Buyers think about what they can pay each month. When rates go up, they can afford a smaller loan, so they bid less. When rates go down, they can bid more.

Housing associations too

For flats, the housing association also has loans. Higher rates can mean a higher monthly fee, which also lowers what buyers bid.

Not the only factor

Prices also depend on incomes, on how many homes are built, on bank rules and on how people feel about the future.

What this means for your guesses

A home that sold a year ago may have sold in a different market. After your guess, the game shows when the home sold. Use that to think about the market at that time.