Mortgage Rates Hit Above 7.5% — Should Homebuyers Lock In or Wait?
Americans already struggling with high home prices now have to face another hurdle: mortgage rates have hit 7.6%. For home shoppers, mortgage rates hitting over 7.5% begs a serious question: accept today’s high borrowing costs or wait for relief? After all, there’s no reliable way to know when rates will fall and the current market gives buyers a reason to be selective.
That said, the answer is a nuanced one — read on to find out how we break it all down.
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How Mortgage Rates Change Homeowner Math
This jump in rates has made the cost of borrowing substantially higher. For context, just a one-percentage point increase in rates adds roughly $255 a month to a $400,000 mortgage, per The Business Journal. With rates now sitting at 7.6%, the effect on monthly payments will certainly be felt.
Mortgage rates are influenced by inflation and Federal Reserve policy and they generally move with the 10-year Treasury yield. This is important to note, as it makes it difficult to know when rates might come back down.
Waiting Could Bring Lower Rates, but More Competition
There are signs that buyers have gained some negotiating power, though, as demand has cooled.
Fortune reported that sellers offered concessions in nearly 45% of all American home sales during the three months ending in August, including help with closing costs and repairs (the median existing-home price was still $429,100, up 1.6% from a year earlier).
Demand has weakened, too. Mortgage purchase applications were down 19% year over year for the week ending Sept. 11, while pending home sales fell 4.7% from a year earlier, per CBS News.
All of this creates a trade-off for anyone considering a delay in the hopes that rates cool. Yes, lower rates could eventually reduce monthly payments, but cheaper borrowing could also bring more buyers back into the market, potentially making homes much more competitive again.
What Should Homebuyers Do, Then?
The Federal Savings Bank noted that instead of trying to predict the market, buyers should consider their down payment, closing costs, income, debt and how long they expect to stay in the home. With that in mind, if a 7.6% mortgage stretches the budget too far, waiting can make sense without requiring a bet that rates will soon fall.
Conversely, for buyers who can comfortably afford the payment, the current market may offer you some negotiating room. Additionally, buying now does not necessarily mean keeping today’s rate forever. If rates fall substantially later, refinancing could be an option (though financing does come with its own costs and is not guaranteed to save money).
There is no truly dependable signal that will tell you when mortgage rates will hit their next low. At 7.6%, borrowing is more expensive than it was earlier this year, but softer demand is also creating opportunities for buyers to negotiate.
Ultimately, the decision comes down to the payment. Rather than trying to predict where rates will go next, the best bet is to ask if today’s mortgage rate would fit comfortably within your budget. If so, waiting solely for a lower rate carries its own uncertainty, if the payment would require stretching financing, then postponing the purchase may be the more practical choice.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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