Let’s chat about one of the significant trends in the real estate market right now: mortgage interest rates. Lenders charge that percentage of your loan amount as an interest fee. In 2021, the average mortgage interest rate was lower than ever. But guess what? It’s been on the rise since then.
Why is that? Well, the Federal Reserve has been periodically raising interest rates in 2023. The average rate for a 15-year fixed-rate mortgage jumped from 5.14% in February to a whopping 6.89% in October—the highest it’s been in over 15 years! Meanwhile, the average rate for a 30-year fixed-rate mortgage reached 7.57% in October.
By the way, I always recommend 15-year mortgages: They tend to have lower rates than 30-year mortgages, and since they end 15 years sooner, you’ll pay less interest over time. That’s a win-win when it comes to saving money!
So, what do these higher rates mean for you?
If you’re a buyer, higher interest rates make it harder to afford to buy a house. So, don’t feel pressured to buy a house you aren’t ready for. On the other hand, don’t let high interest rates scare you out of buying a home if you’re debt-free with both an entire emergency fund and a solid down payment saved up. Just stick to the 25% rule for your monthly payment, and you’ll be in great shape.
If you’re a seller, higher interest rates mean fewer buyers will be motivated to buy your home. So, while houses sold super fast a couple of years ago, your house might sit on the market a little longer now. Prepare to be patient while waiting for offers.
Understandably, whether you’re buying or selling, understanding these trends can help you make informed decisions. The current real estate trends going into 2023 are all about the market slowing down and approaching something normal. It’s essential to stay informed and be prepared for these changes. Happy house hunting or selling!