What is a "low" interest rate? Most economic analysts assume that home sales heat up when interest rates are "low" and slow down when rates are "high."

In truth, mortgage rates−when adjusted to reflect the reality of inflation−remain pretty much the same at all times. If the rate of inflation is 2%, for example, you may be able to find 30-year fixed-rate mortgages bearing an interest rate of less than 7%. Low rates? Not exactly.

If the rate of inflation rises by 2%, the interest rate on mortgages tends to rise by a similar amount. Higher rates? If you are looking at the difference between the mortgage rate and the rate of inflation, you notice that it remains fairly constant. Technically, you are getting pretty much the same interest rate, after adjustment for inflation, no matter what the mortgage rate may be. Such are the mathematics of reality.

Of course, there is more to the question than this. Your income doesn't necessarily rise and fall with the inflation rate, so you can afford a larger home loan when interest rates (and the rate of inflation) are lower than you can when they rise.

Still, most homeowners have learned a magical secret about their home loans. Whenever you take out that loan, you are probably paying the same margin over the rate of inflation that you would pay if inflation were lower and−this is the key part−if inflation declines, mortgage rates will as well, and you can refinance into a lower interest rate. And, further, if they rise, you are the winner because the interest rate on a fixed-rate loan stays where it is until you, not inflation or market forces, change it. For real estate assistance please call Beth at (425) 450-5208 and visit her website at www.bethbillington.com.

Beth Billington is a Realtor® with Coldwell Banker Bain in Bellevue, WA.