When interest rates rise by 1%, your buying power falls by 10%. The reverse also holds true. A 1% decrease in interest rates means you can purchase roughly 10% more house.
Interest rates in March 2026 are about a full percentage point lower than they were in March 2025.
A typical home in Los Angeles, valued at $919,800: $484 a month
At a 7% mortgage rate, your monthly payment would be $4,896. At 6%, it's $4,412, or $484 less each month. Over 30 years, the difference would save you $174,178 in interest.
Buying power boost: If you budgeted $4,896 a month for a mortgage payment, and the interest rate dropped 1 percentage point — from 7% to 6% — you could spend about $80,772 more on a home without increasing your monthly payment.
How Can You Use This Rule to Your Advantage?
1. Stay Informed: Keep an eye on mortgage rate trends to understand when it might be a good time to lock in a lower rate.
2. Consider Pre-Approval: Getting pre-approved for a mortgage early in your home search can help you understand how current rates affect your budget.
3. Explore Rate Buydowns: Ask your lender about strategies like a temporary or permanent rate buydown to lower your interest rate.
4. Act Strategically: If rates are rising, consider accelerating your home purchase timeline to lock in a lower rate. If rates are falling, take your time to find the perfect home.