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Should you wait for mortgage interest rates to drop? Here's what experts think

If you find your dream home then it may not make sense for waits to drop, some experts say. Getty Images

In the market for a new home? The current interest rates aren't as enticing as they were two years ago, but that doesn't mean you should wait. In fact, there are some compelling reasons to pursue a house now, even with the current elevated mortgage interest rates. 

Below, we'll take a closer look at where mortgage interest rates stand, where they may be headed and what experts say about buying a house now. Start by exploring your mortgage options here to see what rate you could qualify for.

Where are mortgage interest rates now?

Over the last year and a half, the average 30-year fixed mortgage rate increased from around 3% up to 6 to 7%. The majority of that increase happened throughout 2022 amidst the Fed rate hikes. This year, we've seen mortgage rates somewhat stabilize, albeit at averages unseen since 2008. 

For home buyers, higher interest rates mean higher borrowing costs and decreased buying power. A simple use of a mortgage calculator underlines this point. For example, a buyer with an annual income of $75,000, a $40,000 down payment and a 720 credit score, could afford a $310,800 house with a 6.5% interest rate and a $389,700 house with a 3.5% interest rate. 

Where are mortgage rates headed?

While the Fed rate hikes look to be slowing and some predict mortgage rates will come down over the next year, experts say you shouldn't expect returns to the 3% range any time soon. 

"Many forecast that we are likely to see some sort of recession at the end of this year or the beginning of next year. However, even if that happens, we're unlikely to see rates go down more than 1-2% from their current values," says Michael Metz, the operations manager at V.I.P. Mortgage, Inc.

See what mortgage interest rate you qualify for here now.

Why you may want to buy now, despite higher rates

When deciding whether to buy a house now or wait, an important factor to consider is that interest rates often have an inverse relationship with housing prices.

"The reality is, as housing prices increase, waiting for rates to drop might not yield the financial advantage buyers hope for. They could be trading dollars in the long run. So, should buyers act now? In many cases, yes,"' says David A. Krebs, a licensed mortgage broker at Dak Mortgage. 

Krebs adds, "Buyers should focus on their need for housing and the availability of homes in their desired location. If they find a house that suits their needs, they should not hesitate due to high-interest rates."

The popular saying goes, "marry the house, date the rate." In other words, if you can get into the home you really want, you should consider it, despite the current rates. The reasoning? You can always refinance to take advantage of lower rates, but you won't always be able to buy a certain house. 

"In most markets, we're still likely to see up to 4% appreciation in home value due to short inventory," adds Metz, "If you find the house that's right for you, for the average American family, it is still better to purchase now with today's rates, gain that appreciation, and pay down some principal." 

He adds, "The option then exists to refinance if rates fall enough, and you plan on staying in the home long enough to recoup costs."

Learn more here now.

Why you may want to wait for mortgage rates to drop

But what if the current interest rates have reduced your buying power to the point where you can't get a home that meets your needs and wants? Then, you may want to wait. 

You may also want to wait if you're planning to buy in certain markets. Mez explains, "If you are inclined to wait, some markets might see some home prices falling. Places that were hotbeds for investors or people buying second homes are more likely to see some home price corrections, particularly in Florida. Combined with the probability of rates falling 1%, it could be advantageous to wait for a year."

However, if you decide to wait, be sure to do so actively. 

"Keep an eye on economic indicators and forecasts: Monitor factors like the Federal Reserve's interest rate decisions, inflation rates, and housing market trends," says Brett Johnson, a real estate agent and the owner of Cash For House Pro. 

The bottom line

No matter what you decide, a good place to start is to understand your options. "Do your homework, understand your financial situation, and get preapproved for a loan. This will give you a clear idea of your budget and put you in a stronger position when you're ready to make an offer," says Kreb. 

He adds, "For those who choose to wait, keep an eye on both interest rates and housing prices. Remember, it's not just about the interest rate, it's about the overall cost of the home and the monthly payment you can afford."

Check out mortgage interest rates here now to see what you're eligible for.

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