Should you wait for mortgage interest rates to drop? Here’s what the experts think

In the market for a new home? Current interest rates aren’t as attractive as they were two years ago, but that doesn’t mean you should should wait. In fact, there are some compelling reasons to pursue a home today, even with today’s elevated mortgage interest rates.

Below, we’ll take a closer look at where mortgage interest rates stand, where they could go, and what experts are saying about buying a home now. Start by exploring your mortgage options here to see what rates you may qualify for

Where are mortgage interest rates now?

Over the past year and a half, the average 30-year fixed mortgage rate has increased from about 3% to 6 to 7%. Much of this increase has occurred amid Fed rate hikes through 2022. This year, we’ve seen mortgage rates stabilize somewhat, albeit at an average not seen since 2008.

For home buyers, higher interest rates mean higher borrowing costs and downgrades purchasing power. A simple use of a mortgage calculator underscores this point. For example, a buyer with an annual income of $75,000, a $40,000 Down payment and a 720 Credit scoreOne can buy a $310,800 home with a 6.5% interest rate and a $389,700 home with a 3.5% interest rate.

Where are mortgage rates going?

However, Fed rate hikes appear to be slowing and some predict mortgage rates will come down Over the next year, experts say you shouldn’t expect returns in the 3% range anytime soon.

“Many are predicting that we’ll see some sort of recession at the end of this year or early next year. But, even if that happens, we’re seeing little chance of them falling more than 1-2% from current values,” said Michael Metz, VIP Mortgage, Operations Manager of Inc.

See what mortgage interest rates you qualify for right now here.

Why you might want to buy now, despite high rates

When deciding whether to buy a home now or wait, an important thing to consider is that interest rates often have an inverse relationship with housing prices.

“The reality is, as housing prices rise, buyers may not get the financial benefits they expect by waiting for rates to drop. They may trade dollars for the long term. So, should buyers act now? In many cases, yes,” David A. said Krebs, a licensed mortgage broker with Duck Mortgage

Krebs adds, “Buyers should focus on their housing needs and the availability of homes in their desired location. If they find a home that suits their needs, they should not hesitate because of high interest rates.”

Popular saying, “Marry at home, marry at home.” In other words, if you can get into the home you really want, you should consider it despite the current rate. Argument? You always can Refinancing Take advantage of lower rates, but you won’t always be able to afford a certain home.

“In most markets, we’re still seeing up to a 4% increase in home prices due to short listings,” Metz added, “if you can find a home that’s right for you for the average American family. With today’s rates to buy now, that appreciation acquire and pay some principal price.”

“The option to refinance exists if rates drop enough, and you plan to stay in the home long enough to recoup costs,” he adds.

Learn more here now.

Why you might want to wait for mortgage rates to drop

But what if current interest rates reduce your purchasing power to the point where you can’t afford a home that meets your needs and wants? Then, you may want to wait.

If you plan to buy in certain markets, you may want to wait. Mez explains, “If you’re willing to wait, some markets may see some home prices drop. Areas that have been hotbeds for investors or second home buyers are more likely to see some home price corrections, especially in Florida. Probability meets. Rate 1 % is decreasing, it may be advantageous to wait a year.”

However, if you decide to wait, be sure to do so proactively.

“Monitor economic indicators and forecasts: Monitor factors such as the Federal Reserve’s interest rate decisions, inflation rates and housing market trends,” says Brett Johnson, a real estate agent and owner of Cash for House Pro.

Bottom line

Whatever you decide, a good place to start is understanding your options. “Do your homework, understand your financial situation, and get pre-approved for a loan. This will give you a clear idea of ​​your budget and put you in a stronger position when you’re ready to make an offer,” says Crabbe.

He adds, “For those who want to wait, keep an eye on both interest rates and housing prices. Remember, it’s not just about the interest rate, it’s about the overall cost of the home and the monthly payments you can afford.”

Check mortgage interest rates here now to see what you qualify for.