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There’s no question that today’s housing market isn’t ideal for homebuyers. With numerous Federal Reserve rate hikes over the last 18 months, mortgage rates have skyrocketed.
The average 30-year fixed mortgage rate is now well above 7% — despite rates recently hitting a 3-week low. That’s well above the 2% to 3% rates that many homebuyers were getting in 2020 and 2021.
But while higher mortgage rates aren’t preferable, as they can dramatically increase the cost of buying a home, there are some upsides to the elevated rate environment. While you may think it’s best to wait for rates to drop, today’s elevated rate environment can actually offer some surprising benefits to homebuyers.
Explore the mortgage loan rates you may qualify for here.
4 ways today’s mortgage rates can benefit homebuyers
Here’s how today’s high mortgage rates can work in favor of those looking to purchase their dream home.
There may be less competition for available inventory
One of the main advantages of high mortgage rates is the reduced competition for homes. When rates are high, many potential buyers may choose to delay their home-buying plans, thinking they can secure a better deal later when rates potentially decrease. This means less competition in the market, which can be a golden opportunity for you — especially considering that home inventory remains low in many markets across the nation.
With fewer buyers vying for the same properties, you won’t have to worry as much about losing out on your dream home due to a bidding war. And, sellers may also be more open to negotiation. In turn, you could have a better chance of closing the deal at a price that suits your budget.
Learn more about today’s top mortgage rates here.
There may be more options for buyers
High mortgage rates can also lead to more choices for buyers. Not only are many people choosing to wait out the high rates in hopes that mortgage rates will decline, but it’s also harder to qualify for a loan when interest rates are elevated. In turn, homes are staying on the market longer in many markets, giving you more options — and more time to make a decision.
While some markets still remain hot, not all of them are. And, if homes are sitting for longer than they were in recent years, you’ll have a wider selection to choose from. With more options on the market, you’re more likely to find a home that ticks all the boxes on your wishlist — which may not have been possible during the buying frenzy when rates were in the 2% to 3% range.
The risk may be lower for buyers
In a competitive real estate market with low mortgage rates, buyers often face pressure to waive contingencies, like inspections and appraisals, in order to get their offer accepted by a seller. This heightened risk can be stressful and financially burdensome — and could lead to disaster in some cases.
However, when mortgage rates are high and competition is lower, buyers may have the upper hand. Sellers may be more willing to accommodate your requests, including allowing necessary contingencies. This reduces your risk and ensures you can make an informed decision about the property you’re purchasing.
Buyers still have the option to lower their rate over time
While today’s high mortgage rates may not be ideal for initial home financing, they come with the opportunity to lower your interest rate before closing — or over time. For example, you can explore options like buying down the rate on your home. Buying down the rate involves paying extra upfront to your lender to reduce your interest rate, which can save you money over the life of your mortgage.
You also have the option of refinancing when rates become more favorable. Rates are high right now, but it’s unlikely that they’ll stay that way forever. As economic conditions change, mortgage rates may decrease, allowing you to refinance your mortgage at a more attractive rate, potentially reducing your monthly payments.
The bottom line
High mortgage rates may seem like a disadvantage if you’re looking for a home to purchase right now, but they can actually offer numerous benefits to buyers. With less competition, a broader range of choices, reduced buyer risk and the potential to improve your mortgage terms later, today’s high rates can work in your favor. So, if you’re in the market for a new home, don’t be discouraged by the numbers. Embrace the advantages they bring and make the most of this unique opportunity.
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