An encouraging development for those looking to purchase a home is that, following months of rising mortgage rates spurred by growing inflation and the US Federal Reserve’s raising base rates to battle that inflation, there are now indications that the average home lending rate in the US is starting to decrease. Let’s examine what is really going on with mortgage rates and what they might have in store for us as we get farther towards 2023.
Reverse the Trend
On April 13th, Freddie Mac announced that average mortgage rates have decreased for the sixth consecutive week, falling from 6.28 percent to 6.27 percent. Although it may not seem like much of a difference, keep in mind that rates were lower last week than they were the week before, when they were 6.32 percent. When you consider that on March 9th, Freddie Mac reported average lending prices were at 6.73 percent, plainly demonstrating just how much more affordable home loans have become over those five weeks, it becomes even more noteworthy. This was the last high before this downward trend started.
Of course, it is much more clear how the real estate scene has evolved when viewed through the perspective of year-over-year increases in mortgage rates. Mortgage interest rates were around 5% in April 2022. The industry reached a new high of 7.08 percent in November of that year as a result of the Fed’s later decision to hike base rates even higher. The Fed has stated that the period of rapid rate increases is over, and the slow easing of interest rates in the mortgage market indicates that the real estate market is starting to normalise.
Issues with the New Information
Anyone who keeps their finger on the real estate sector’s pulse will welcome the findings of the Freddie Mac research study. Lower loan rates are excellent news for anyone looking to buy or sell a home soon or for real estate professionals trying to gain more business.
Be warned, though, that the data Freddie Mac provided us with has certain inherent limitations. The number in the research only includes borrowers with ideal conditions, which is the most crucial item to bear in mind. Every borrower in the poll made at least a 20% down payment on their home loan, and they all had excellent credit scores.
The dilemma of whether to purchase something or not?
So what should a potential homeowner do? The ability to more easily afford to buy the house you’ve had your eye on for a while makes it tempting to take advantage of today’s lower mortgage rates. Making the best financial decisions you can is always a good idea when it comes to a purchase that could actually need taking out hundreds of thousands of dollars in loans because a home is a huge investment. Waiting for the mortgage rate to drop a little bit more could save you a lot of money over the course of your loan.
Right now, it could be a good idea to hold off for at least a few weeks.
The real estate markets are constantly shifting, so there’s always a potential that rates could rise rather than fall. However, if you keep a careful check on the cost of borrowing moving forward, you should be able to decide for yourself, based on your unique situation. Keep in mind that those ultra-low mortgage lending rates of 3 percent are not likely to be seen again any time soon as you consider whether or not to commit.
