Mortgage Rates Just Plunged to Their Lowest Level in More Than a Year. Is Now the Time to Buy?

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Mortgage rates just took a dive. But does that make it a good time to buy a home? [[{“value”:”

If you’ve been tracking mortgage rates in the hopes of seeing them fall, here’s some good news. The average rate on a 30-year mortgage recently dropped from 6.73% to 6.47%. That’s the lowest rate since May 2023.

But does this recent plunge in mortgage rates mean you should rush into homeownership before the summer wraps up? Not necessarily.

Mortgage rates are lower, but they’re still high

Mortgage rates are indeed a lot lower today than they were a week ago, but an average 30-year loan rate of 6.47% is still pretty high. Roughly two years ago today, the average 30-year mortgage rate was 4.99%. And five years ago today, it was 3.60%.

Of course, we’re in a different interest rate environment now compared to the summer of 2022 and 2019. The point, however, is that while it’s encouraging to see mortgage rates on the downswing, there’s still further to go.

The Federal Reserve is expected to start cutting its benchmark interest rate before the end of the year, and rate cuts should continue into 2025. That’s likely to send mortgage rates lower.

And while we may not see them dip into the 3% or 4% range, it’s not unreasonable to assume that buyers may be looking at mortgages in the 5% range at some point next year. If you’re in a stable housing situation now, it could pay to wait.

Home prices are up as well

Another thing to consider is that U.S. home prices are up right now. Zillow reports that the average U.S. home value is $363,438. That’s a 3.8% increase from a year ago. The combination of higher prices and elevated mortgage rates could make buying a home difficult.

Once mortgage rates fall further, more homeowners who have been hesitant to give up their lower rates should be motivated to list their properties. That should open up inventory and help supply catch up with demand, thereby helping home prices come down.

Consider your financial situation

While you shouldn’t rush out and buy a home just because mortgage rates are now a bit lower, doing so could also be a perfectly fine idea if your financial situation allows for it. Consider your overall financial picture when making your choice.

Don’t put pressure on yourself to buy a home this month just because of a notable dip in mortgage rates. If you can afford a home based on today’s prices and mortgage rates, and you find one that suits your needs, then you may want to pounce — especially if you’ve been looking for a while and have finally come across a listing you’re excited about.

You might still have some saving to do for a down payment, or perhaps buying a home in your preferred neighborhood is still a stretch based on current prices. So take the time to think things through because there’s a good chance mortgage rates will continue to drop if you’re patient.

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The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Zillow Group. The Motley Fool has a disclosure policy.

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