Here’s the truth: no matter if you’re buying a waterfront home in Sarasota or a condo in St. Pete, interest rates shape your buying power far more than most people realize. And in a market like ours, where prices are competitive and desirable homes don’t sit for long, understanding how these works could save you thousands. Or cost you the home you really wanted.
What interest rates actually do
Let’s start simple. When you take out a mortgage, the bank isn’t just lending you money, they’re charging you for it. That’s the interest rate. It determines how much extra you’ll pay over time, and how much your monthly payment will be.
So when rates are low, you’re borrowing money at a discount. When rates go up, every dollar you borrow becomes more expensive. That affects what you can afford, not just on paper, but in your real monthly budget.
A change in rate can change everything
Let's use Florida as an example:
Say you’re pre-approved to spend $750,000 on a home. At a 5% interest rate, your estimated monthly mortgage (principal and interest only) might be around $4,025. Now, if rates jump to 6.5%, that same monthly payment only gets you a home around $665,000. That’s nearly a $90,000 difference in purchase power.
So even if home prices stay the same, your budget shifts when rates move. This is one of the most common surprises buyers face, especially when they’ve been browsing homes online and then get a pre-approval based on a higher-than-expected rate.
Why this matters so much
Florida is one of the most dynamic real estate markets in the country. In places like Sarasota, Naples, Tampa, and Miami, prices have remained strong due to high demand, low inventory, and continued relocation from other states.
When interest rates rise, buyers often assume prices will drop to balance things out. But that hasn’t been the case in most of Florida. Demand stays high because of the lifestyle, tax advantages, and weather. And since many sellers are locked into low interest rates, fewer are listing their homes, which keeps prices steady.
So instead of price corrections, what we’re seeing is affordability compression. Buyers are stretching their budgets or settling for less house. That’s why watching rates closely and acting when they’re favorable, matters more here than in slower-moving markets.
Who feels it the most
First-time buyers and those financing a larger portion of their purchase are most impacted. Even a 1% rate change can increase monthly payments by hundreds of dollars. That can affect your debt-to-income ratio, your loan approval, and your overall comfort level.
Even higher-end buyers who are putting down large down payments are feeling it, especially if they’re moving from a market where they sold at a low rate and are now buying into a higher one.
Thinking long-term
Yes, a higher rate means a higher monthly payment today. But it doesn’t mean you’re stuck with that rate forever. If you find the right home at a fair price, refinancing later when rates drop again is always an option.
Trying to time the market perfectly is a gamble. If the right property comes up and fits your lifestyle, locking it in with a higher rate now may be smarter than waiting and missing out entirely.
Kelli Eggen
