To many prospective homeowners’ chagrins, interest rates have been on the rise since the Summer of 2022. Many people that got into the market during that time were pleased to get an interest rate between 2-4%, which were record lows. Only a few months later, homebuyers were seeing interest rates rise into the 7% range, drastically affecting their purchasing power. There are many reasons as to why interest rates have skyrocketed, but in the short term, it comes as a result of inflation and the Federal Reserve’s efforts to curb such.
According to Forbes, the average rate for a 30-year fixed mortgage is 6.66%, which is more than double the average rate in January 2022. Some economists and executives in the industry predict rates could drop back into the five percent range by second quarter of 2023. Others predict it could stay between 6.5% and 7.5% for the foreseeable future, so long as inflation and a tightened monetary policy at the Federal level continue.
What does this mean for prospective homebuyers? In typical lawyer fashion, I have to say, “it depends”. If interest rates lower, we could see another flooded market with more buyers than homes, thereby lowering your leverage. However, buying now could be beneficial to you, because there are limited buyers. This is giving buyers more leverage to get inspection items corrected and negotiate lower purchase prices. Another option is to negotiate with the Seller to pay down your interest rate, lowering it a couple percentage points for two years. That is why at our office, we embrace the phrase “Marry the house, date the mortgage.”
If you are looking to buy or sell a home, reach out to our office. With over 70 years of combined experience, the lawyers at MBMP have the knowledge and expertise to make the home buying and selling process as stress free as possible.
Written By: Michael Palmer, Managing Partner/Attorney