Only a few years ago, in 2021, mortgage rates hovered around 3%. This period was characterized by a strong seller’s market, with homeowners consistently receiving high offers and properties spending minimal time on the market.
As mortgage rates have increased, the market has shifted towards a more balanced landscape. Sellers and buyers now operate on a more equal footing, and as inventory grows with more sellers entering the market, buyers find themselves in a more advantageous position. Of course, each market is different in many ways but buyers sometimes ask for closing costs, a lower than listed sales price, repairs, furnishings, etc. and sometimes all the above!
According to bankrate.com,
· the average rate for a 30-year fixed mortgage reached its highest point in 1981, just above 16 percent.
· The lowest average for the 30-year fixed rate occurred in 2021, dipping just under 3 percent.
· In 2025, the average 30-year mortgage rate has ranged between 6.67 percent and 7.19 percent. As of July 30, the average stands at 6.75 percent.
So, let’s talk about what happens if the rates drop again. I think it is easiest to put this in practical perspective. Here is a scenario. Let’s suppose you are looking to buy a home for $500,000 and the current rate is 6.75%. You plan to put 20% down as a down payment to avoid mortgage insurance. Your down payment is $100,000 and you are financing $400,000 over 30 years at the 6.75%. Your monthly principal and interest come to $2594.39. You decide to wait hoping rates drop. Then they do! You are now looking at a 6% rate and you are excited! But hold on, other buyers are excited now and we have shifted back to a seller’s market where demand for homes is greater. You realize that home you could have bought for $500,000 is now yours for $550,000. (yes, this happened back in 2021). The house has multiple offers so you waive inspections perhaps or even the appraisal. (That’s a whole other blog, btw.) At $550,000 your 20% down payment increases to $110,000 and your principal and interest payment drops to $2398.20, a savings of about $200 per month. Note it is going to take 50 months, over 4 years, to regain that $10,000 extra down payment.
Why not buy now and consider a refinance if and when rates do drop? Many mortgage lenders are offering programs if the rates should drop by ½% of more. These programs sometimes waive an extra appraisal and offer no lender fees so you really come out ahead.
One little thing to consider is that the last time the feds lowered the Fed Funds Rate, mortgage rates actually increased. The Fed Funds Rate relates to the daily lending rate between banks. There’s no guarantee out there so do what is best for you!
Any questions? The Hometown Team is here to help. Put us to work for you!
