When Will Mortgage Rates Go Down? 

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Any prospective homebuyer knows the past few years have been a waiting game for mortgage rates. From young families looking for starter homes to retirees looking to sell their homes and move to 55 and over communities, everyone has been affected. The good news? The wait may be over soon. Homebuyers nationwide have been asking, “When will interest rates go down?” And as your trusted real estate pros, we want to provide answers. 

How Have High Interest Rates Affected Buyers and Sellers?  

The real estate market has felt the impact of rising rates post-pandemic, and the industry has changed for buyers and sellers alike.  

For buyers, a rise in rates meant higher costs to borrow. And with diminished purchasing power, the American Dream of homeownership has become less accessible. Re-calculating budgets and re-evaluating plans has delayed many buyers or left them wondering whether they should buy a new home at all. 

And for sellers, these conditions have created an environment so competitive that making a sale can seem impossible. With closings delayed and buyers more skeptical than ever, selling a home has been a complicated landscape, with homes on the market longer and asking prices going down to close deals.  

To understand the nuances of these effects, let’s talk about how mortgage rates are set in the first place.  

How are Mortgage Rates Determined?  

When we see mortgage rates rise and fall, we think of them as a single percentage. But really, they’re influenced by several factors, from the health of the overall economy to your personal finances. We’ll cover the most influential pieces of the puzzle. 

How The Federal Reserve Can Affect Mortgage Rates

You’ll hear a lot about “the fed” in the mortgage industry — so let’s clear up exactly who they are and how they influence rates. As officially named, the Federal Reserve doesn’t simply set loan rates as many believe. Instead, they adjust the federal funds rate — which is the rate banks pay to borrow money from each other — with input from factors like inflation, unemployment, or economic growth. To keep up with this “Fed rate,” banks adjust the interest rates they charge their customers to borrow money.   

How Lender Policies Affect Mortgage Rates

Every loan company must consider its own costs, profits, and competition when setting rates. These costs include staffing, office operation, licensing, and more. You may also find lenders offer different options when it comes to mortgage refinance rates. A lender searching for new customers may offer a slightly lower rate, while a lender with more longevity and a good reputation may charge a higher rate.  

Your Credit Score Can Affect Your Mortgage Rate

While the national economy and even corporate decisions affect mortgage rates overall, your personal finances also play a role. Lenders calculate individual rates based on a variety of criteria. These include your income, any outstanding debt, your credit score, and even your education level. There are also different loan types like FHA loans (which have more lenient credit requirements), USDA loans for more rural properties, and VA loans, which typically offer lower rates for Veterans.  

So, When Will Mortgage Rates Go Down?  

The forecast for today’s mortgage rates tends to be optimistic, with many experts anticipating they’ll stay under 7%. Rates have already decreased a percentage point since October 2023, and there’s talk of possible federal rate cuts that could bring them closer to 6%. However, other reports indicate the decline may be slower, reaching around 6.4% by the end of the year.  

It’s important to note that these forecasts hinge on many factors, including the Federal Reserve’s policies, inflation rates, and broader economic conditions. Consider, too, that current rates seem exceptionally high when compared to the record-low rates experienced during the pandemic — a low that we may not see again, especially in the near future.  

Tips for Buying/Selling While Mortgage Rates Are High 

While predictions show rates decreasing this year, they may not be as low as you’d like. And if you’re not looking to find a fixer-upper house, your options may seem limited. So, we’ve put together some helpful tips for both buyers and sellers on dealing with a tricky real estate market. 

Tips for Sellers 

Selling in a market with high rates can be a challenge, too. With fewer buyers to choose from, your options may seem limited, but there are things you can do to improve your odds:  

1. Price Competitively 

Compare your home to similar properties in the area to understand the current market value, and look at numbers for the average home loan near you. A reasonable price is much more likely to attract the attention you want.  

2. Curb Appeal Matters 

Make sure any necessary repairs are completed, and stage your home inside and out. Consider hiring a professional photographer to showcase your home’s best features in your listings.  

3. Be Flexible with Financing 

From offering to cover closing costs to simply being patient with more time-consuming loan types (due to added inspections, etc.), flexibility when it comes to financing is a great asset.  

Tips for Buyers 

Buying while rates are high can feel daunting, but with the right strategy, it’s easier to navigate the market. Here are a few tips.  

1. Increase Your Down Payment 

If you can swing it, a bigger down payment can help you qualify for better rates and reduce the amount of money you need to borrow, making payments more manageable.  

2. Work on Your Credit 

Lenders offer the best available rates to borrowers with strong credit profiles. Work on improving your score by paying down debts and making your payments on time.  

3. Buy Points 

If you have extra cash, consider buying points to lower your interest rate. This can be worked out with your lender, which basically means paying upfront in exchange for a lower interest rate over the course of your loan.  

An Agent Makes All the Difference 

Our #1 tip whether you’re buying or selling a home in today’s market? Work with a real estate agent. A knowledgeable agent with experience in your local market can provide insights, strategies, and advice tailored to current market conditions.

They’ll have answers to all your questions, from “When will mortgage interest rates go down?” to “What does ‘under contract‘ mean?” and more. And with commissions as low as 2%, you can be sure your agent has your best interest in mind when you choose IDEAL AGENT. Contact us today to get started.  

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