Here’s the magic number when it comes to mortgage rates in 2023.
Unless you’re a real estate agent or a loan officer, there is nothing simple about understanding the housing market right now. You may be wondering when is the right time to buy a home or what to ask your real estate agent, and with so many factors affecting the market, it’s getting more complex by the day. Inflation is no secret and rates are now in the high 6 percent to low 7 percent range—triple what they’ve previously been within the past few years. How is the average home buyer or owner supposed to know what’s a good rate or when it’s the perfect time to sell? Experts say, if your home has this mortgage rate or lower, hold onto it.
“Locking your interest rate with your lender is one of the most important parts of ensuring you can afford your monthly mortgage payment,” Scott Leventon tells Parade.
Leventon is a former NMLS-licensed MLO and now CEO at Interphase Marketing LLC, a digital marketing agency that provides content creation and writing services to clients in business, finance and real estate.
“High interest rates increase the cost of borrowing and make mortgages more expensive for homeowners,” Leventon adds. “They also reduce the rate at which borrowers build equity in their homes and increase the amount of interest paid each month.”
According to the U.S. News and World Report, a housing price correction could be on the way (although some may even argue it’s happening right now) because demand is steadily rising and inventory is still rather low.
“The exact value of X will depend on your individual circumstances, such as the loan amount, loan term and your credit score,” Jasen Edwards, Licensed Real Estate Agent and Coach at Agent Advice, tells Parade. “Generally, experts recommend refinancing your mortgage if your current interest rate is one to two percentage points higher than current market rates.”
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While there really is no “magic” number per se, because it depends on each buyer or seller’s individual situation, 6 percent is about as low as mortgage rates come right now in the current economy. To put yourself in the best possible position, keep an eye on the market and how it may shift.
“One to two percent is the ‘magic’ number because it represents the current mortgage rate that is in line with the market,” Edwards explains. “If your current mortgage rate is equal to or lower than 1 to 2 percent, then it is likely a good decision to hold onto your house rather than refinance.”
Again, a “magic mortgage number” looks different for everybody, but with rates where they are right now—high 6s, low 7s—that ideal rate today seems to be about 6 percent.
“Locking your interest rate at 6 percent is the magic number for mortgage rates in today’s mortgage environment for several reasons,” explains Sharad Gupta, owner and agent at Your Home Sold Guaranteed Realty. “First, 6 percent is still relatively low compared to historic mortgage rates where average rates reached double digits in the late 1990s. Second, a 6 percent interest rate translates into lower monthly payments, which more borrowers can afford.”
A mortgage rate today that’s on the higher end of the spectrum would be closer to 7 percent.
“Lastly, 6 percent interest rates allow borrowers to qualify for larger loans and buy homes they otherwise may not be able to afford with higher interest rates,” Gupta adds.
Dottie Herman is the longtime CEO and current Vice Chair for Douglas Elliman.
“If you have a 30-year fixed rate ranging from 2.5 percent to 4.0 percent, you should hold on to the property for as long as you can,” Herman explains. “If you have a mortgage rate higher than 4 percent, it may make sense to sell your home. In this market, we cannot just focus on the rate, but also on the prices of the home. If you sell your home for a reasonable price and you work out the numbers so that it is enough to cover [the] down payment and closing costs for your new home, then do it!”
“It’s very tough to predict with so much volatility today between the banking crisis, inflation and international affairs,” Herman explains. “Many economists are expecting the interest rates to normalize over the next one to two years. Given how quickly interest rates had risen within the past year, it had essentially shocked the economy to the point where the Federal Reserve was trying to balance inflation and economic growth.”
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