With a restricted number of actual estate listings and a solid level of buyer demand, home values are currently through the roof. That’s bad enough. But what’s made things more difficult for purchasers is that mortgage rates have been climbing at a rapid pace since the beginning of the year. Now, they’ve reached a level that hasn’t been seen since 2008.
By the start of 2022, the average 30-year mortgage rate was around 3 percent. It’s currently averaging 6.13 percent, which is a huge shift in such a short amount of time. And there is anxiety that rising mortgage rates will cause a big number of home buyers to back out, causing home prices to fall.
Mortgage applications, on the other hand, are down by half from a year ago. And if rates continue to rise, demand for home loans might plunge even further.
A real estate market crash isn’t likely to happen now because housing inventory is still so low. But as consumers turn down these higher borrowing rates, house prices may gradually start to drop. That might provide some comfort for buyers, but only a limited amount when you consider where mortgage rates are now.
Is there a way to save money on a mortgage?
It’s clear that financing a home today costs more than it did at the start of the year. And, for those on a budget, this is truly disappointing. But there are things buyers can do to get a home loan with a lower interest rate.
The first step is to have a reliable source of information on interest rates. Those with higher credit scores might save money. Because they’re viewed as less of a risk, mortgage lenders tend to offer borrowers with strong credit lower borrowing rates.
Consumers with bad credit may improve their scores by paying all bills on time and reducing credit card debts. Checking credit reports for errors, as well as correcting any problems, might also assist consumers in boosting their credit ratings.
Another option that you might wish to explore is a shorter-term loan. However, given where house prices are today, many buyers can’t afford the higher monthly payments associated with a 15- or 20-year mortgage.
Will mortgage rates keep climbing?
The Federal Reserve is scheduled to meet on Wednesday, and it is widely expected to raise interest rates once more in an effort to cool down prices. As a result, borrowing costs for consumers are anticipated to rise across the board, including mortgage rates.
Because of this, prospective buyers who are having difficulty finding a cheap home right now might wish to put their purchase on hold till house prices begin to drop. It appears that mortgage rates will rise for a time. But the combination of higher mortgages and overpriced homes is an unfavorable one for purchasers in general. Those that are prepared to put their plans on hold may discover that it’s easier to buy a property in a year when housing inventory hopefully increases and lowers home prices.