Mortgage Rates Going Down
The highly anticipated Fed meeting finally happened today and the news is very promising for homebuyers (and therefore sellers!). In anticipation of this week's meeting, national mortgage rates had already hit a 19-month low last week of 6.2% on 30-year fixed loans and today's cuts will continue that downward trend (currently 6.15% according to Mortgage News Daily). In addition, Fed Chairman Jerome Powell implied that there will be future cuts as well. While the Fed didn't share exact plans, the industry predicts that there will be another 50 basis points worth of cuts this year and an additional 100 basis points in 2025. Keep in mind that these numbers are not mortgage rates, they just influence where mortgage rates land. In other words, we anticipate mortgage rates to continue to go down later this year and again in 2025.
Colorado's Golden Handcuffs
As of July, Colorado had the highest gap of all states for mortgage lock-in rate at 3.45 points, as reported by the July DMAR Report. In other words, Colorado had the largest discrepancy between the new mortgage rates available in July and the pre-existing CO homeowner's mortgage rates. This, affectionately known as the Golden Handcuffs, continued to cause a disincentive for people to move. The good news is that today's and potential future rate cuts will incentivize buyers to take out that key and remove those handcuffs!
So...Should You Buy Now?
We have clients asking, "Should I lock in my rate now or wait?" Our advice is that it really depends on your situation! Here are some things to consider:
- Your Personal Circumstances: What is your current living situation? What is the reason for your desired move? If your situation is timely, locking in a rate now could be a good idea. Your quality of life should be a big consideration when weighing all your options.
- Your Realistic Budget: Can you comfortably pay a monthly mortgage (including taxes & insurance) based on your current rate? For a quick calculation, you can use our mortgage calculator, but you'll need to talk to a mortgage broker directly to get an accurate rate as they vary quite a bit based on your credit, etc. Be sure to use the number your are comfortable with based on your other life expenses, not just what you are approved for.
- (Try to) Ignore Recent History: If the rates hadn't been so low last year, would you feel differently about today's rates? While it's hard to forget the record breaking low rates from just 3 years ago, we all have to remember that those rates will likely not happen anytime soon. In fact, we've already seen a huge improvement from the nearly 8% rates from late 2023. This significant decrease translates into tremendous savings over a 30-year loan.
- Competition Might Increase: If we've learned nothing in the past 4 years, it's that no one has a crystal ball for the housing market. That being said, the recent and potential upcoming rate decreases are likely to increase competition for homebuyers leading to higher sales prices. If this happens, your new home will likely cost more, and therefore increase your monthly payment even though the rate is lower.
- Refinancing Is Always An Option: If rates go down significantly, you will always have the option to refinance. A record number of Coloradans opted to refinance a handful of years ago, achieving the now unfathomable rates in the 2-3% range.
These are just a considerations that should help you determine whether you're ready to make the move (sorry for the dad joke)! If you want to talk more in depth, we're more than happy to chat! We also know some great lenders that can help you determine what your actual rate and monthly payment would be.
Graph Showcasing the 10 Year Trend for U.S. Mortgage Rates:
Posted by Jess Feaster on
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