Mortgage rates have seen dramatic fluctuations recently and prospective homebuyers may be questioning if they should wait for lower mortgage rates before purchasing property.
No. Experts don’t expect rates to fall drastically over the coming years, which means now is an opportune time for prospective homebuyers with debt-free status and an emergency fund to make an offer on a property.
1. It’s a good time to buy a home.
Age-old advice that home buying should never be delayed still holds true for financially prepared home buyers, though its timing depends on various factors: such as family size and job/work location considerations as well as affordability factors like what monthly payments you can manage or if any lump sum payments are possible or desired.
Mortgage rates have reached unprecedented highs and housing prices are on an upward path, limiting buyers’ purchasing power and undermining consumer trust to an unprecedented degree.
However, if your finances are secure and you plan to buy soon after the next rate increase, then it might be prudent to enter the market before rates spike again. When house hunting in winter months when there are less properties on offer it helps to have an agent who knows your local area who knows the local nuances well as well as having a flexible schedule to help with househunting or open houses.
2. It’s a bad time to buy a home.
Federal Reserve efforts to control inflation have resulted in rising mortgage rates, sapping homebuying optimism from the market. According to Fannie Mae’s Home Purchase Sentiment Index, only 14% of consumers surveyed believe now is an appropriate time for purchasing property.
Higher interest rates make mortgage loans less affordable; just one percentage point change can alter monthly payments by as much as $70–depending on how it affects a $100,000 mortgage loan.
Homeowners who purchased before rates skyrocketed may be reluctant to upgrade if the interest rate exceeds 7%; this could limit supply and drive prices higher still.
So if you’re considering purchasing a home, it might be beneficial to wait until your credit score improves or mortgage rates decline; but keep in mind that every family is different; only you know whether now is the appropriate time for you to purchase a house.
3. It’s a good time to refinance.
Many homeowners are turning to mortgage refinancing to lower monthly payments, pay off their loans faster or tap home equity for cash. With mortgage refinance rates being relatively higher today compared with 2022 and 2023, it’s wise to evaluate if switching lenders and loan terms could save money or support financial goals – using a mortgage refinance calculator is one way of crunching the numbers and estimating potential savings.
Refinancing can be worthwhile if the rate offered by lenders is at least one percentage point lower than what you currently pay, according to experts. Even better would be cutting interest rates by half or one full percentage point on larger loan amounts – however be wary not to use your savings or loan proceeds for discretionary expenses which would put you back behind on your financial goals; use it instead towards building up an emergency fund or paying down debt.
4. It’s a bad time to sell.
Purchase and sale of homes can be an expensive endeavor with lasting ramifications on finances, so it is vital to carefully consider all options and select the one which best meets your personal circumstances.
Many home buyers are waiting to purchase until mortgage rates have fallen before purchasing, however this might not be wise.
No one knows exactly what will happen with interest rates in the future, although inflation-linked increases should cause them to rise and remain higher for longer than they are now. Furthermore, mortgage rates in previous decades were much higher.
If you plan to purchase a home in the future, now is an opportune time to start improving your credit profile by paying down debt, not applying for new credit, and otherwise improving it as much as possible. Doing this will enable you to qualify for loans with lower rates when they come due.