Mortgage rates have been a hot topic as homebuyers eagerly await further drops in interest rates.
The average 30-year fixed mortgage rate comes in today at 6.46%
Spread: 267 bps pic.twitter.com/BdKzB3hZeq
— Lance Lambert (@NewsLambert) August 21, 2024
Experts predict that the Federal Reserve may cut rates by 25 to 50 basis points in September, which would lead to lower mortgage rates. However, homebuyers should be cautious and avoid certain mistakes before rates drop.
Zillow says falling mortgage rates won't kick start home price growth
Zillow expects…
mortgage rates to fall
national home price growth to flatline@MalasMeghan latest for @ResidentialClub https://t.co/TcYSxeQ0mf pic.twitter.com/yClJ9upoe5— Lance Lambert (@NewsLambert) August 21, 2024
Locking in a rate now could be a costly error, as there is a strong likelihood of rates falling even more in the near future. Instead, buyers should use this time to shop around and compare rates from different lenders. Being prepared with paperwork and maintaining a good credit score will also help when it comes time to secure a loan.
It is important to understand the potential consequences of waiting for rates to drop. Lower rates could attract more buyers to the market, increasing competition and driving up home prices.
Higher rates have dampened refinance activity since 2022, but homeowners may still choose to refinance for reasons other than to lower their mortgage rate. Take a closer look at current refinance trends in our latest monthly outlook. https://t.co/8vLEdXYyUM pic.twitter.com/ypyjbLXZKQ
— Freddie Mac (@FreddieMac) August 21, 2024
In some cases, it may be better to buy now with a slightly higher rate and refinance later, rather than facing more competition and higher prices in the future.
As of August 22, 2024, the 30-year fixed mortgage rate has fallen below 6%, and the 30-year refinance rate is also dropping.
Caution advised before rates decline
This trend is expected to continue after the Federal Reserve’s meeting on September 18.
The decrease in rates is partly due to a revised jobs report indicating a cooler job market, which is favorable for mortgage rates. The Federal Reserve wants to see a slower economy before cutting the federal funds rate, which could lead to further decreases in mortgage rates throughout 2025. Despite the potential for lower rates, experts warn that this alone will not solve the housing affordability crisis.
Ryan Serhant, CEO of SERHANT., notes that mortgage rates have doubled since 2021, sidelining many potential buyers and sellers. Even if rates drop, affordability will remain a challenge. Lower rates could briefly make housing more affordable, but this is likely to be offset by rising home prices as buyers gain more purchasing power and engage in bidding wars.
To truly address the affordability crisis, experts argue that a significant increase in housing supply or faster income growth relative to home prices is necessary. In conclusion, while falling mortgage rates may provide short-term relief for homebuyers, they are not a sustainable solution to the ongoing issue of housing affordability. Buyers should be strategic in their approach and understand the potential consequences of waiting for rates to drop further.
