What’s Going On With Interest Rates?

In the ever-changing landscape of the real estate market, one factor that consistently influences decisions is the interest rate. 

For well over a year now, realtors, mortgage brokers, homeowners, and potential home buyers alike have been nervously watching the rates as they leapt ever higher from their all-time low back in 2020.  

But recently, there have finally been some significant developments in this area that potential home buyers and realtors should be aware of and may find hopeful.

Current State of Interest Rates

The average top-tier 30-year fixed mortgage rate has seen a drop from over 8% in October to under 7.5%. 

As of December 8, 2023, the rate stands at 7.09%. This is a significant decrease and represents a 4-month low in mortgage rates. 

While other elements of the economy, such as job stats and inflation rates, continue to cause the mortgage rates to fluctuate, it appears that they are fairly stable. 

A Downward Trend?

What’s even more interesting is that these rates may finally be legitimately trending downward. This is a crucial development, as it could potentially lead to an increase in home buying activity. 

However, it’s important to note that Mortgage Backed Securities (MBS) prices are moderately weaker, which may result in higher mortgage rates. Additionally, when certain aspects of the economy, such as the labor market, are strong like they are now, can also keep interest rates high. 

Overall, however, we can say we have legitimately observed a downward trend over the last 4 months, and it seems to be holding steady. 

Practical Implications for Home Buyers and Realtors

This downward trend in mortgage rates has several practical implications for potential home buyers and realtors.

Lower Monthly Payments: With lower interest rates, the monthly mortgage payments will be lower for the same loan amount. This could affect the budgeting for potential home buyers and provide realtors with more options to present to their clients.

Increased Affordability: Lower interest rates could make some homes more affordable for potential buyers, especially those with tight budgets or those looking at higher-priced homes. Realtors can use this information to guide their clients toward homes previously considered out of their price range.

Market Dynamics: However, the decrease in rates could potentially stimulate the housing market, as more buyers might be able to afford homes. This could potentially lead to an increase in home prices over time, providing realtors with the opportunity to close more deals. But it also means the new sense of affordability may be under threat as housing prices go up. 

What’s It All Mean? 

The current interest rate presents both opportunities and challenges for potential home buyers and realtors. 

Many have been waiting for interest rates to come down to feel like they can better afford to purchase a home. So lower rates may encourage those potential home buyers back out into the market and coax them into making a purchase. 

However, because this will increase demand, housing prices will likely begin to climb again, perhaps simultaneously with the decrease in rates. This will, ironically, make housing less affordable.

Perhaps what homebuyers and realtors alike should focus on is this – houses will likely not fall in price. They will continue to increase, possibly rapidly if demand suddenly increases. 

So, if you are needing to get into your own home, or to purchase a bigger home, now is more affordable than a year from now. 

The silver lining is that, by all appearances, the interest rates are finally beginning to cool off, so it is hopeful that within a year, you may find a good opportunity to refinance for a lower rate which will make your mortgage even more affordable. 

But if you wait for the interest rates to cool off to a number you like, you may discover that the home you need is no longer in your price range. 

Stay Up To Date

It’s important to stay informed about these developments and understand their implications. But the housing market, interest rates, and economic impacts are complex, to say the least.

Consulting with a financial advisor or mortgage professional could provide more personalized advice based on individual circumstances. 

At Gulfside Mortgage Services, we have a passion for helping our clients get into the home of their dreams and helping them thrive. We have survived two decades of economic ups and downs and housing market ups and downs (including the crash of 2008). 

We have the expertise and experience required to help you or your client find the lending options they need. Give us a call today to learn more about current interest rates and what they mean for you.