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As long as inflation is still persistent — and above the Federal Reserve’s 2% goal — interest rates will remain elevated. In fact, after months of cooling inflation actually ticked back up in July. And the benchmark interest rate now sits at a 22-year high.
Mortgage interest rates have also suffered in recent months. After hovering around record lows in 2020 and 2021, rates have risen exponentially and now currently sit around 7.5%. Rates on mortgages are the highest they’ve been in decades, leaving homebuyers with a series of poor options.
That said, even with rates as high as they currently are, there are some compelling reasons why buyers should act now and stop holding out for a better rate environment.
Start by exploring your mortgage rate eligibility here now.
4 reasons why you shouldn’t wait for mortgage rates to drop
Here are four reasons why buyers shouldn’t wait for mortgage rates to fall.
Rates could go higher
Sure, rates are high now, but what happens if they rise even further? Don’t dismiss the possibility of additional rate hikes. Federal Reserve chair Jerome Powell has already implied that additional rate increases could be coming in 2023. If that doesn’t happen this month, then don’t be surprised if it comes around the holidays.
That could be devastating news for those buyers who were planning on timing the market to improve their rate offer. While a 7.5% interest rate isn’t anyone’s idea of a great deal, it could prove to be a desirable one when compared to the prevailing rate in November, December or even January 2024. Just ask those who locked in a “high” 6% rate earlier this year.
Check rates and terms here now to learn more.
You may lose your dream home
Your dream home may only come on the market at one time, and it may not be during the most favorable rate environment. So don’t make perfect the enemy of the good and skip out on the chance to buy the home.
“Date the rate and marry the home,” most experts advise. In other words: The interest rate you secure now is temporary and can (and likely will) be adjusted in the future. But the dream home available now could be gone forever. Adjust your purchase plans accordingly.
You could refinance in the future
Mortgage rates and mortgage refinance rates are both elevated now. But they won’t be forever, at which point you could refinance to a lower rate and, potentially, even better terms.
So don’t feel like you’ll be saddled with a higher rate forever. While experts don’t agree on when rates will come down (and by how much), they all do agree that they will come down at some point — giving you an opportunity to take advantage and pay less.
The rate may not be as bad as it looks
Don’t get discouraged by the rate you find online. There are multiple ways you can secure something lower. This includes (but is not limited to) taking out an adjustable-rate mortgage (which comes with a lower introductory rate before changing over time) or purchasing mortgage points from the lender (to secure a permanently lower rate).
Neither option is ideal and both should be approached cautiously. But both options can save buyers money with a lower rate now. And that extra money could be very helpful to have in today’s economy.
Learn more about your mortgage options here now.
The bottom line
While mortgage rates are high today, buyers should be judicious about their approach. Waiting for them to drop back to pandemic-era lows may not be the wisest move. Instead, buyers should understand that rates could go even higher. And, if they wait for them to stabilize, they may lost the chance to buy their dream home. Plus, they could always refinance to a lower rate in the future — or get a lower one now by applying for an adjustable-rate mortgage or buying mortgage points from their lender.
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