Mortgage rates have recently started to climb, drawing significant attention from the media. You might have noticed headlines highlighting that rates have reached their highest point in over two decades (as shown in the graph below).

If you're considering a real estate move, this news might hit you like a gut punch. You could be questioning whether you should delay your plans. Here's what you need to understand:

The Impact of Higher Mortgage Rates

There's no denying that mortgage rates are currently higher than they have been in recent years. When rates go up, it affects the overall affordability of homes. Here's how it works: As rates rise, the cost of borrowing money for your home purchase increases. Consequently, your future monthly mortgage payments also go up.

The Urban Institute sheds light on how this situation is influencing both buyers and sellers:

When mortgage rates go up, monthly housing payments on new purchases also increase. For potential buyers, increased monthly payments can reduce the share of available affordable homes . . . Additionally, higher interest rates mean fewer homes on the market, as existing homeowners have an incentive to hold on to their home to keep their low interest rate.” 

Essentially, some individuals are reconsidering their plans due to the current state of mortgage rates. But what you need to ask is whether that's a sound strategy.

What Lies Ahead for Mortgage Rates?

If you're eagerly awaiting a drop in mortgage rates, you're not alone. Many people share this hope. However, here's the reality: No one can predict when or if it will happen. Even experts can't provide a definite outlook.

Forecasts suggest that rates may decline in the coming months, but recent data indicates a rise in rates. This disparity illustrates the unpredictability of mortgage rates.

The best advice for your move is this: Don't attempt to control what's beyond your control. This includes trying to time the market or make assumptions about future mortgage rate changes. As CBS News advises:

If you're in the market for a new home, experts typically recommend focusing your search on the right home purchase — not the interest rate environment.” 

Instead, focus on assembling a team of competent professionals, including a trusted lender and a real estate agent, who can explain the market dynamics and their implications for your situation. If you need to relocate for job reasons, want to be closer to family, or are undergoing other significant life changes, a reliable team can help you achieve your goals, even in the current scenario.

Programs to lower your mortgage rate

A 2-1 mortgage buydown is a smart way to purchase a new home while ensuring affordable payments in the early years. Here's how it works: In the first two years of your mortgage, your interest rate is reduced (2% lower in the first year, 1% lower in the second year), making your monthly payments lower and more manageable. This helps you secure your dream home now, even when interest rates may be higher. After those initial two years, the interest rate increases to a predefined level at today's rate. The goal is to refinance the mortgage during those first two years, if and when rates go down, potentially reducing your payments further. It's a financial strategy that offers you the best of both worlds - affordability upfront and flexibility down the road, making homeownership more accessible and financially viable for you now.

In Conclusion

The key advice for your real estate journey is to refrain from fixating on elements beyond your control, especially mortgage rates. Even experts can't provide absolute certainty about their future trajectory. Instead, concentrate on building a team of trustworthy professionals who can keep you well-informed. When you're prepared to initiate the process, let's connect.