Interest rates should be an integral component of homebuying decisions, but they shouldn’t be the determining factor. So long as you are financially ready and committed to purchasing, there is no reason to wait for rates to go down before taking the leap.
Mortgage rates will likely decrease in 2024, though any decrease will likely not be dramatic. Here are a few reasons why you shouldn’t wait:
1. You’ll lose out on the home of your dreams
Mortgage rates should be taken into account when purchasing a home, but they shouldn’t be the determining factor. With home prices increasing and inflation efforts being implemented by the Federal Reserve, rates have seen steady increase over recent years – though as a buyer you will be able to refinance once rates drop back down again.
But, if you wait for rates to fall and home prices to increase in the meantime, you could miss out on finding your dream home. Additionally, buyers who had been considering making an offer could jump at reduced interest rates, potentially further inflating prices.
If you’re waiting for interest rates to fall, taking steps to improve your credit profile by paying down debt and forgoing new credit can make you a more desirable borrower when applying for mortgage loans; but remember, your decision should depend on both personal finances and readiness rather than market fluctuations.
2. You’ll face higher home prices
Purchase of a home is an enormous financial commitment and waiting until interest rates decline is not always the wisest course of action.
Waiting could cost you dearly; as home prices climb and mortgage payments skyrocket. Furthermore, with inventory still limited in many markets and competition for your new dream home fierce, putting off making your purchase could become increasingly challenging.
Although no one knows for certain where mortgage rates will head next, experts expect they’ll eventually dip below 6% again – though even then it is unlikely they’ll reach the low of 3% again; interest rates tend to move in tandem with 10-year Treasury yields which in turn track inflation; as inflation remains on the rise and rates could soon return up again.
3. You’ll pay more in the long run
Mortgage rates play a vital role when it comes to homebuying, with lower mortgage rates leading to smaller monthly payments and less overall interest paid over time. For instance, with 2.8% fixed-rate loans from 2024 onwards your total interest would cost $98,530 as opposed to the $234,050 charged at 2018’s rates. According to Bright MLS mortgage rates are expected to fall this year compared with their lows seen between 2020-2021; still waiting may not be the wisest strategy!
4. You’ll have to refinance at a higher rate
Home buyers who wait until mortgage rates fall before making their purchase can often take advantage of them by refinancing. But if rates continue to fall while saving for a down payment, and these savings become available after they become reality, qualifying for an even more costly mortgage may become necessary.
Mortgage rates are directly tied to the federal funds rate, used by banks when lending money overnight between each other. When this rate decreases, mortgage rates also reduce accordingly.
Unfortunately, there’s no reliable way of knowing where mortgage rates will head; however, you can take steps such as improving your credit score and increasing your down payment that may help secure you a better rate if they drop in the future. That way, when the time comes for buying the home of your dreams without worrying about higher monthly payments in future – that alone makes all this effort worth while!