Rising rates are one of the topics dominating the discussion in the housing market today, with the average 30-year fixed mortgage rate from Freddie Mac climbing above 3%. And, with experts predicting that interest rates will rise further in the coming months, that debate isn’t going away anytime soon.
But, as a homebuyer, what does an interest rate above 3% really mean?
Buyers Still Have a Great Opportunity with Today’s Average Mortgage Rate.
Buyers do not want mortgage rates to rise because any increase raises your monthly mortgage payment. However, it is critical to consider today’s average mortgage rate. The graph below compares today’s rate to average rates over the last five years: As the graph shows, even though the current rate is higher than 3%, it is still extremely competitive.
However, today’s rate isn’t just low when compared to recent years. To truly put today in context, consider the last 50 years (see graph below): When we look further back, we can see that today’s rate is truly exceptional in comparison.
What Does This Mean for You?
It’s understandable to be disappointed that you missed out on sub-3 percent mortgage rates. However, it’s important to remember that buying now still makes sense because experts predict that interest rates will continue to rise. And as interest rates rise, it will become more expensive to buy a home.
As First American’s Chief Economist, Mark Fleming, explains:
“Rising mortgage rates, all else equal, will diminish house-buying power, meaning it will cost more per month for a borrower to buy ‘their same home.’”
In other words, the longer you wait, the more money you will have to pay.
The Bottom Line About Interest Rates?
While the average mortgage rate today is higher than it was just a few months ago, 3 percent mortgage rates should not deter you from your home-buying goals. Today’s rate is still historically low. And, because interest rates are expected to rise further, purchasing now could save you money in the long run. Let’s get in touch so you can lock in a great rate right away.