Could Mortgage Rates Dip Below 6% in February?

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It might happen, but even if it doesn’t, you might consider buying a home anyway. 

Although buying a home was not an easy prospect in 2021, those in the market had one thing going for them — low mortgage rates. But borrowing rates on mortgage loans rose sharply in 2022, and during the latter part of the year, the average 30-year mortgage rate climbed above 7%.

But thankfully, mortgage rates have been dropping in 2023. And as of this writing, the average 30-year mortgage rate is 6.09%, according to Freddie Mac.

If this trend continues, it’s possible that mortgage borrowers will be able to sign a 30-year loan for under 6% at some point this month. But even if that doesn’t happen, it could pay to buy a home nonetheless.

Rates could continue to drop

A decline in mortgage rates could boil down to supply and demand. It’s not shocking that demand for homes has dropped, given the tough housing market conditions buyers are looking at. Mortgage lenders may be getting desperate to ramp up business, and lowering borrowing rates is a good way to go about that.

Between that and the general trends we’ve seen over the past five weeks, it’s not unreasonable to think that buyers who sign a 30-year mortgage could end up locking in rates at under 6% before the end of the month. Granted, we’re probably not going to see rates hit the low 5% range all that soon. But a mortgage in the upper 5% range isn’t all that bad given the rates we’ve seen over the past six months.

Should you wait for mortgage rates to drop to buy a home?

Not necessarily. First of all, we can really only speculate about the direction mortgage rates will trend in.

There’s reason to think mortgage rates will continue to drop, but that may not happen. And so rather than try to time your home purchase to coincide with when rates look like a bargain, a better bet is to make an offer on a home and sign a mortgage when you find a property that checks off all the right boxes and fits comfortably into your budget.

As a general rule, you should not spend more than 30% of your take-home pay on housing. And that includes your mortgage payment, homeowners insurance, property taxes, and any other predictable monthly cost. But if you’re able to afford a home based on this guideline, then it could pay to move forward with a purchase even if you end up with a mortgage rate that’s higher than you would’ve liked.

In time, mortgage rates could drop to the point where you’ll be looking at a 30-year mortgage in the 3% or 4% range again. And once that happens, you can look to refinance your loan. So whether mortgage rates dip below 6% or not this month, the reality is that if you’re financially ready to buy a home and you come across a property you love, you shouldn’t force yourself to wait — and run the risk of losing out on a home you could otherwise see yourself living in happily.

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