Mortgage Lenders: Don't Wait for Rates to Fall
January 7, 2024
CBS News published an end-of-2023 article speculating about the fate of mortgage rates in the new year. That article addresses many issues, but one important question stands out from the rest of the article.
Should borrowers wait until mortgage rates fall back down to the 5% range before committing to buy a home?
Waiting Out Mortgage Loan Interest Rates
Some look at the rates hovering between the 6% and 7% range and wonder how long before rates will settle down, at least to the point where 15-year fixed-rate loans and 30-year fixed-rate loans reside in the same percentage range.
At press time, 30-year fixed interest rates were in the low 7% range, and 15-year fixed rates were in the 6% range. How long would it take rates to fall below 6%? There’s no metric you can use to measure that. Too many variables can affect the outcome.
And that may be one reason why the CBS News article has quotes from mortgage bankers advising borrowers not to try to ride out the current rates. From the CBS article:
“Regardless of what the Fed does with respect to rates, I would never advise prospective homebuyers to try to time the market or trajectory of mortgage rates," according to one director of residential lending.
Instead, it is better to time a loan application so that it is best for the applicant in terms of circumstances, savings, and opportunity.
Don’t Wait Out Rates?
The big reason lenders tell borrowers not to time their loan to a hoped-for rate decrease has everything to do with control. You simply have no control over what rates will do, when they will do it, and for how long.
The low-rate environment of yesterday gives way to the elevated rates of today due to a combination of market forces, investor reactions, and current events. Your best bet is to give yourself extra time to plan and save, choose your new home carefully, and apply when you feel the time is right.
One More Thing
If the above is insufficient to convince potential borrowers to act when they are ready and not when rates fall back into more familiar territory, consider one detail the CBS News article points out for those inclined to wait.
According to CBS, it may take several years before conditions are right for a return to the 5% range.
And given that market watcher predictions about rate recovery in the housing market have been less than accurate to date, the “several years’ prediction could stretch farther into the future than some house hunters are willing to wait before considering an application.
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RELATED VIDEOS:
Get to Know HUD
Using an FHA Loan Calculator
Living in a Single Family Home
Should borrowers wait until mortgage rates fall back down to the 5% range before committing to buy a home?
Waiting Out Mortgage Loan Interest Rates
Some look at the rates hovering between the 6% and 7% range and wonder how long before rates will settle down, at least to the point where 15-year fixed-rate loans and 30-year fixed-rate loans reside in the same percentage range.
At press time, 30-year fixed interest rates were in the low 7% range, and 15-year fixed rates were in the 6% range. How long would it take rates to fall below 6%? There’s no metric you can use to measure that. Too many variables can affect the outcome.
And that may be one reason why the CBS News article has quotes from mortgage bankers advising borrowers not to try to ride out the current rates. From the CBS article:
“Regardless of what the Fed does with respect to rates, I would never advise prospective homebuyers to try to time the market or trajectory of mortgage rates," according to one director of residential lending.
Instead, it is better to time a loan application so that it is best for the applicant in terms of circumstances, savings, and opportunity.
Don’t Wait Out Rates?
The big reason lenders tell borrowers not to time their loan to a hoped-for rate decrease has everything to do with control. You simply have no control over what rates will do, when they will do it, and for how long.
The low-rate environment of yesterday gives way to the elevated rates of today due to a combination of market forces, investor reactions, and current events. Your best bet is to give yourself extra time to plan and save, choose your new home carefully, and apply when you feel the time is right.
One More Thing
If the above is insufficient to convince potential borrowers to act when they are ready and not when rates fall back into more familiar territory, consider one detail the CBS News article points out for those inclined to wait.
According to CBS, it may take several years before conditions are right for a return to the 5% range.
And given that market watcher predictions about rate recovery in the housing market have been less than accurate to date, the “several years’ prediction could stretch farther into the future than some house hunters are willing to wait before considering an application.
------------------------------
RELATED VIDEOS:
Get to Know HUD
Using an FHA Loan Calculator
Living in a Single Family Home
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