For the first time in 11 years, mortgage rates reached 5% this week. The rate has increased by 1.24 percentage points in the past five weeks, and 1.89 points as compared to the end of 2021.

Why should we care?
These shifting winds may have serious effects on proptechs. For now, homebuyers are moving to adjustable-rate mortgages and government-backed mortgages for first-time buyers, which may pressure lenders to adjust the kinds of capital they offer. “Refi business is practically gone, it’s all dried up at this point from the rate-and-term perspective," said Robert Heck, Vice President of Mortgage at Morty, suggesting the need for total pivots among lenders still focusing heavily on refinancing. In the long run, though, proptechs may have to contend with a cooler housing market, and, potentially, fewer customers, especially if they work in a B2C space. Other proptechs may see a boom in business, including those offering partial ownership models as well as proptechs looking to reduce residential construction costs. “For now, many first-time buyers are still feeling the sting of sticker shock, with the mortgage payment for a median-priced home running $530 above a year ago, adding over $6,300 to the annual housing budget,” said George Ratiu, Manager of Economic Research at Realtor.com. In turn, these added pressures may increase demand for lending fintechs that offer short-term loans. Increased mortgage rates will clearly affect far more businesses than just proptechs.