Marry Your Home But Date Your Rate!

After several years of low mortgage interest rates, we are now in a new era of rising interest rates as the Fed tries to tame inflation armed with the whip of increasing interest rates.

How did we get here?

In the latter part of the 2000’s, mortgage interest rates began their decline due to the housing crash that led to the Great Recession. Mortgage rates continued to drop through the end of the decade ending 2009 with an Average 30-Year Rate of 5.04% (source: Freddie Mac). The next decade continued the trend while mortgage rates fell into the 4% range and below. And then, the pandemic hit causing the lowest rates we’ve seen. 2020 and early 2021 saw mortgage rates below 3% until the Fed began its swift and aggressive campaign of raising interest rates in order to control inflation.

What to do?

Feelings of regret can be triggered if you were unable to purchase your new home under the previous low mortgage rate era. Such regret may lead you to shelve your home search and take a "wait and see” stance until the mortgage rates recede.

For a moment, consider a different response:

1. Your cost to buy a home largely depends on the actual purchase price of your home as well as the interest rate that you secure. As we shift from a very frenzied market to a more normal market, this may be a good time to lock in a great purchase price. This is not to say that prices are dropping or that the housing market is crashing but, sellers are becoming more reasonable as they witness fewer bidding wars taking place.

2. Just as important, while you may be buying your home for the long term, your mortgage rate can be traded in later when rates do come down again. Remember, you marry your home but you date your rate!

3. With a plan to refinance once rates decrease in the next year or two, explore alternative interest-only loan products that you can obtain now to make the time in between less painful!

4. Typically, investors caution those that try to time the market. This applies to the market of mortgage interest rates. We advise that you buy your next home when you are financially ready and when you can afford the home that you desire rather than when the mortgage interest rates are at their lowest.

Contact Team Plunkett today to plan your next move!