The Roller Coaster Ride of Mortgage Rates

After hitting a high of 7.79% in October 2023, the average 30-year fixed mortgage rate dropped to 6.60% in early 2024 only to see it pop back up above 7% to start the summer, then go down to 6.09% as of September 19, 2024, according to Freddie Mac data. We anticipate a slight decrease in mortgage rates after the Federal Reserve recently made a significant cut to its benchmark interest rate, though time will tell just how much it will go down.

Over the past two years, mortgage rates have soared to their highest levels in decades, fueled, in part, by the Federal Reserve’s aggressive interest rate policy actions to tame inflation. Now that inflation has calmed a bit to approximately 2.6%, the hope is that the trend will continue to move towards 2%, according to the Federal Reserve Chair, Jerome Powell. 

Despite mortgage rates remaining elevated and fluctuating within a relatively narrow range over the past few months, many housing market experts expect rates to decrease slightly in the coming months, due to the Federal Reserve finally implementing the anticipated cut to its benchmark interest rate. On September 18, 2024, the Federal Reserve cut the benchmark interest rate by half a point (or 50 basis points) to a range between 4.75%-5% — it remains to be seen just how that move will directly affect mortgage rates. For clarity, other than emergency rate cuts during COVID, 2008 was the last time the rate was cut by half a point, due to the global financial crisis at the time. Lower mortgage rates will likely come soon, though it might not be immediate – your creditworthiness and loan terms also affect the rate you’re offered. 

Is now a good time to buy? That’s the age-old question…but is there a concrete answer?

Determining whether now is the right time to buy a home depends on several factors. Here are some further considerations to help you decide:

• Check current mortgage interest rates. Lower rates can make borrowing cheaper and reduce your monthly payments. (Keep an eye on these rates in the wake of the Federal Reserve’s recent benchmark interest rate reduction).
• Look at current housing market trends in your desired area(s). Are prices rising, falling, or stable? Understanding the market cycle can help you make a more informed decision.
• Being open to expanding the location parameters slightly on your home search could prove beneficial.
• Ensure you have a stable income, a good credit score, and enough savings for a down payment and closing costs. This can include both your main contribution, as well as any gifts from loving family members for qualified individuals. Calculate how much house you can afford based on your specific financial situation.
• Consider your long-term plans. Do you plan to stay in the area for several years? Are you looking to start a family? Buying a home is a significant commitment, and it typically takes time to build equity.
• Evaluate the overall economic conditions, including job stability and inflation rates, as they can impact your financial stability and home affordability.
• Analyze the supply and demand in the housing market frequently. In a seller’s market, there may be less inventory and higher prices. In a buyer’s market, you might find better deals and more negotiating power.

Historically, owning and properly maintaining a house typically provides long-term benefits, though everyone must assess their own situation based on their unique, individual circumstances. Gaining control over any outstanding debts is a great first step in the homebuying process, as well as contacting a real estate professional or Mid-Island Mortgage Corp. This will help a prospective homebuyer to understand the proper information needed to begin the journey to homeownership.