Mortgage rates play a vital role in monthly expenses, and any increase could make home buying harder on budgets.
As such, hopeful buyers are asking themselves: Should I wait for lower mortgage rates before purchasing?
Interest rates have steadily climbed over recent years as the Federal Reserve attempts to stem inflation, yet are unlikely to drop much further.
1. It’s a good time to buy.
Purchase of a home when mortgage rates are at their peak can save money, particularly since recent rates increased due to concerns of a potential debt ceiling default (which was eventually avoided when Congress reached a deal), inflation, and potential recessionary effects. But for financially prepared home owners, owning their property remains a valuable investment opportunity.
Current mortgage rates stand at 6.4 percent; should they increase over the course of next year, your purchasing power could significantly diminish.
Decisions about purchasing should always depend on both your personal financial circumstances and goals. If you have been saving for a down payment and improving your credit score while being able to afford the mortgage payment each month, now might be a great time to house hunt. Be mindful of long-term goals; for instance if they include expanding family, changing careers, or moving locations in the near future then postponing buying until timing makes more sense.
2. It’s a bad time to buy.
Mortgage rates and home prices can make buying difficult; but waiting will cost more in the long run.
High mortgage rates and home prices are turning off many potential home buyers from entering the housing market; with 85% of respondents to October Home Purchase Sentiment Index survey citing it as a poor time to buy, with pricey homes and elevated mortgage rates as main causes.
But if homeownership fits with your goals and finances, the current housing market could present the perfect opportunity. Lower mortgage rates will increase purchasing power and make housing more affordable than ever. To learn more about how today’s mortgage rates could affect you personally, reach out to a lender in your area who will perform an assessment and offer tailored solutions that align with your specific goals.
3. It’s a good time to refinance.
Refinancing can make financial sense when interest rates have declined and monthly payments can be reduced; you could even qualify for more advantageous terms than what your current mortgage has, potentially saving thousands over its lifecycle.
Refinancing involves having your lender pay off your existing mortgage and replacing it with one with more favorable terms, often at more attractive interest rates. As this process can incur closing costs, be sure to carefully consider all financial implications before refinancing.
Refinancing may not make financial sense for everyone; for instance, if you plan on moving or using the proceeds to pay off debt or improve your credit score soon. In these instances, refinancing may not make economic sense.
Refinancing early would reset this progression and set back any progress you had made earlier on in your term, potentially jeopardizing any initial gains you made in saving on interest payments and moving toward paying principal. By refinancing early, this might erode some of the gains made over time.
4. It’s a bad time to sell.
If you’re thinking about selling your current home, now may not be an optimal time. Increased mortgage rates reduce buyer pool sizes, leading to slower sales and decreased prices for homes on the market.
Fannie Mae recently conducted a poll that indicates Americans’ pessimistic outlook towards the housing market. Per this poll, respondents who believe now is an ideal time to sell have fallen below 50% for the first time since August 2022.
Low interest rates often spark a real estate frenzy. Homebuyers find it easier to locate and finance new properties, while bidding wars could see you get top dollar for your existing one. If you’re considering selling, connecting with a local real estate agent is an excellent way to begin this process.