What Rising Interest Rates Mean for Buyers

Interest rates are one of the most important factors influencing home affordability, and as we move through 2025, rates continue to rise in response to global inflation and central bank policies. If you're planning to buy a home soon, it’s essential to understand how rising interest rates affect your purchasing power—and what you can do to stay ahead.

Why Are Interest Rates Rising?

Interest rates are often adjusted by a country's central bank (like the Bangko Sentral ng Pilipinas or the U.S. Federal Reserve) to control inflation. When inflation rises, central banks increase interest rates to slow down borrowing and spending, which helps stabilize the economy.

In 2025, rates have been on the rise due to:

• Persistent inflation

• Higher government borrowing

• Global economic uncertainty

• Currency depreciation in emerging markets

How Higher Rates Affect Buyers

1. Higher Monthly Mortgage Payments

As interest rates climb, the cost of borrowing increases. This means that for the same loan amount, you'll be paying more in monthly amortizations.

Example:

• ₱3,000,000 loan at 4.5% interest = ~₱15,200/month

• ₱3,000,000 loan at 7% interest = ~₱19,950/month

That’s a difference of nearly ₱4,800 per month!

2. Reduced Buying Power

With higher monthly payments, many buyers can no longer afford the same price range they could just a year ago. For example, a budget of ₱20,000/month might have qualified you for a ₱3.2M property last year—but only ₱2.5M today.

3. Stricter Loan Qualifications

Banks may apply stricter credit checks as interest rates rise to ensure borrowers can handle higher payments. This could affect your loan approval if your income is tight or your debt-to-income ratio is high.

4. Price Stability or Slight Declines

On a positive note, rising interest rates often cool down overheated real estate markets. This can lead to price stability or even price reductions in some areas—potentially giving buyers more options and negotiation power.

What You Can Do as a Buyer

1. Get Pre-Approved Now

Secure your loan pre-approval as soon as possible to lock in current rates before they rise further.

2. Re-Evaluate Your Budget

Speak with your lender or financial advisor to see how rate changes affect your price range. Adjust expectations early to avoid disappointments later.

3. Consider Fixed-Rate Loans

If available, go for fixed-rate loans to protect yourself from future rate hikes.

4. Look Into Government Programs

Explore financing options like Pag-IBIG or low-interest loans from reputable banks or cooperatives, which may offer more favorable terms for OFWs, first-time buyers, or salaried employees.

5. Act Strategically

With rising rates, now may be the time to buy before affordability decreases further. Focus on value, location, and long-term investment potential.

Final Thoughts

Rising interest rates are a reality of today’s economy, but they don’t have to derail your homeownership plans. By understanding how they affect your finances and making informed choices, you can still secure a great home that fits your needs and budget.

Ready to buy your home in 2025? Let’s talk—I’ll help you navigate the market confidently and find the best financing options available.