Homes are 5% more affordable thanks to falling mortgage rates. But will it last?


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Buyers may get some relief, but only temporarily.

Key points

  • After rising sharply all year, mortgage rates fell significantly last week.
  • Potential buyers may want to act quickly to lock in loans while they are more affordable.

There’s a reason 2022 has been such a tough year for potential home buyers. Not only have property values ​​skyrocketed, but mortgage rates have risen sharply since the start of the year. In fact, the average 30-year mortgage rate has crossed the 6% mark on more than one occasion this year, which has forced many potential buyers to put their plans on hold.

But last week, mortgage rates actually fell at their fastest rate since December 2008. And while rates are still higher than they were at the start of the year, they are much more attractive now than they were a month ago.

This is why it is advantageous for buyers to secure a mortgage as soon as possible. Those who wait could miss the opportunity to prepare for more affordable payments.

Affordability just increased by 5%

Thanks to falling mortgage rates, buying a home is now about 5% more affordable than it was a week ago, according to the National Association of Realtors. In fact, compared to rates a week ago, today’s rates could save around $100 per month on a typical home loan repayment.

That’s a big deal, because it’s really the first time all year that mortgage rates have dropped in any noticeable way. That’s not to say they haven’t dipped modestly at times. But now the average rate on a 30-year mortgage is around 5.3%, which is a lot more attractive than the 5.7% average rate borrowers were eyeing a week ago.

Are you ready to apply for a mortgage?

If you’re house hunting, now might be the time to lock in a mortgage – before rates go up. But are you ready to take the plunge?

As a general rule, your monthly housing costs should not exceed 30% of your net salary. And those housing costs should include not only your mortgage payments, but also unavoidable expenses such as home insurance, property taxes, and, if applicable, HOA fees. If you analyze the numbers, you might find that you can afford a mortgage, especially when rates are low.

But affordability isn’t the only thing to consider. You also need to make sure your financial situation is strong enough to qualify for a home loan. This means having a good credit score, a reasonable debt-to-equity ratio, and enough income to support the mortgage you’re considering taking out.

Additionally, although different lenders have different down payment requirements, putting less than 20% on a conventional mortgage will mean having to pay for private mortgage insurance (PMI). It’s an expensive premium that you might want to avoid, especially at a time when house prices are still high and mortgage rates aren’t exactly low.

Will the fall in mortgage rates persist?

Probably not. The Federal Reserve intends to move forward with further interest rate hikes, which, in turn, will likely impact consumer borrowing rates. Admittedly, it may take some time for the average 30-year loan to hit the 6% mark again – and that’s all the more reason to act quickly if you’re looking to buy a home.

Today’s rates aren’t a bargain, but they’re a lot more affordable than some of the rates we’ve seen over the past month. And so if you really want to become an owner this year, now is the time to act.

The Best Mortgage Lender in Ascent in 2022

Mortgage rates are rising – and fast. But they are still relatively low by historical standards. So if you want to take advantage of rates before they get too high, you’ll want to find a lender who can help you get the best rate possible.

This is where Better Mortgage comes in.

You can get pre-approved in as little as 3 minutes, without a credit check, and lock in your rate at any time. Another plus? They do not charge origination or lender fees (which can reach 2% of the loan amount for some lenders).

Read our free review

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