Should I lock in a rate now and call a real estate agent even though I wasn’t planning on buying a new home for another year? Should I look to start packing and sell my home now, even though I wasn’t planning on downsizing for a few years?
These are questions I have been hearing recently. The two main reasons behind the line of questioning seems to be that 1) some potential buyers are worried that if the rates keep increasing, mortgages might soon make it so they can’t afford the home they want; and 2) some potential sellers believe this will lead to home buyers making lower offers on their property, or possibly not even looking at their home (i.e., instead of a dozen potential prospects, a home seller may have a handful or less).
Now while it is true that any increase in a mortgage rate could have a noticeable impact on what someone may pay on a monthly basis, many times that difference is not a factor in a decision to look at, or even make an offer on, different homes. This is especially true for homes in the lower end of the market, where the mortgage interest is being calculated on an already lower amount. And there are two other things you may want to keep in mind at this time:
- Mortgage rates are still very low when compared to historical averages. At well under 5% on some 30 year mortgages, home buyers are still getting a bargain when compared to rates of years ago (just think of the double digit rates that were around for most of the 1980s).
- The reason people start the process of looking for a new home is not because a particular home is listed at a good price, or their bank cold called them telling them what a great mortgage rate is available. They decide to look for a new home because they outgrew their current home, got a new job or any number of events that may have occurred. It’s at the time they decide they need to move that they typically start looking for the best mortgage for them.
Sure, if we have to have a mortgage we would all like to lock in a rate near or at the lowest level possible. But the decision to buy or sell a home is hardly ever dictated by what the going rate is. Life does. And even if you did lock in a rate today, there’s always the possibility that it goes lower (or higher tomorrow).
Still have questions on what to do? Please give me a call. I may not be able to answer specific financial questions for you, but I can help you better understand your situation, and possibly refer you to those who may have some deeper knowledge of any specific questions.