5 ways homebuyers will react to average mortgage rates hitting 5%

The ongoing rise in average mortgage rates is a key affordability issue for prospective homebuyers. As mortgage rates get closer to 5%, many consumers are rethinking their approach to buying a home, according to Redfin.

Mortgage rates reached 4% in late 2017, and made their way past 4.5% just this month. Industry projections all point to similar patterns for the remainder of 2018, with interest rates expected to reach 5% by the end of the year.

To be sure, mortgage rates are certainly rising, but they're still near historic lows. And while both homebuyers and mortgage professionals may be concerned about the rising cost to buy a home, a tight supply of inventory for sale still remains the toughest challenge for the housing market.

"Homebuyers are well aware that higher mortgage rates means higher monthly payments, but mortgage rates remain very low, historically, and buyers will make compromises," said Taylor Marr, senior economist at Redfin, in a press release.

"Most of the pressure buyers are feeling is from competition for a very limited number of homes for sale. The fact that such a small share of buyers will scrap their plans to buy a home if rates surpass 5% reflects their determination to be a part of the housing market," he continued.

From lowering expectations about their ideal home to moving faster to close a deal, here's a look at five ways house hunters say they would react to average mortgage rates hitting 5%.

The data is derived from a Redfin survey, conducted by SurveyGizmo, which polled 4,000 consumers who had purchased or sold a home within the last year, attempted to do so, or planned to do so soon, according to the company. Similar surveys were conducted in May and November of 2017.

About 21% of consumers said they would look into other areas or purchase a smaller home because of rising rates, an increase from 18% of people from a year ago.