Interest rates are an important factor that influences the housing market. The cost of borrowing money can have a major effect on how much people can afford to spend when purchasing a home, and whether they will choose to invest in real estate at all.

When interest rates are low, more potential buyers are able to qualify for mortgages since the amount of money needed up front is substantially lower. This opens up the market to people who may not have been able to purchase a home otherwise due to lack of funds or poor credit scores. When these potential buyers enter the market, there is increased competition among first-time homebuyers and investors alike as they compete for properties with relatively low prices – resulting in higher demand and rising house prices.