If youre thinking about buying or selling a home, youve probably got mortgage rates on your mind. Thats because youve likely heard that mortgage rates impact how much you can afford in your monthly mortgage payment, and you want to factor that into your planning. Heres what you need to know.
Whats Happening with Mortgage Rates?
Mortgage rates have been trending down recently. While thats good news for your homebuying plans, its important to know that rates can be unpredictable because theyre affected by many factors.Things like the economy, job market, inflation, and decisions made by the Federal Reserve all play a part. So, even as rates go down, they can still bounce around a bit based on new economic data. As Odeta Kushi, Deputy Chief Economist at First American, says:
The ongoing deceleration in inflation, coupled with the Federal Reserves recent indication of potential rate cuts [in 2024], suggests an environment supportive of modest declines in mortgage rates. Barring any unforeseen circumstances and resurgence in inflation, lower mortgage rates could be on the horizon, but the journey towards them might be slow and bumpy.
How Do These Changes Affect You?
When mortgage rates change, it affects how much you pay each month for your home loan. Even a small rate change can make a big difference to your monthly bill.
Take a look at the chart below to see how different mortgage rates impact your house payment each month for various loan amounts. Imagine you can afford a monthly payment of $2,600 for your home loan. The green boxes in the chart show payments in that range or lower based on varying mortgage rates.
So, what does this mean for you and your plans to move? If youve been holding out and waiting for rates to come down, know that its already happening. You just have to decide, based on the expert projections and your ownbudget, when youll be willing to jump back in. As Sam Khater, Chief Economist atFreddie Mac,says:
The decline in mortgage rates does increase prospective homebuyers purchasing power and should begin to pique their interest in making a move.
Ask yourself this:what number do I want to see rates hit before Im ready to move?
Maybe its 6.25%. Maybe its 6.0%. Or maybe its once they hit 5.99%. The exact percentagewhere you feel comfortable kicking off your search again is personal. Once you have that number in mind, you dont need to follow rates yourself and wait for it to become a reality.
But now that rates are trending downward, you may need to ask fast.If you wait for mortgage rates to drop further, you might find yourself dealing with more competition as other buyers re-ignite their home searches too. In the housing market, theres generally a relationship between mortgage rates and buyer demand. Typically, the higher rates are, the lower buyer demand is. But when rates start to come down, buyers who were on the fence over higher rates will resume their searches.
How Can You Keep Track of the Latest on Rates?
Real estate agents have the expertise to help you understand whats happening and what it means for you. They can provide tools and visuals, like the chart above, to show how rate changes impact your buying power.You dont need a mortgage expert to understand what's going on in the market; you just need a professional real estate advisor by your side.
