Mortgage Rates Are Rising Again. Should Madison Buyers Wait to Buy?

What higher rates mean for your monthly payment, purchasing power and decision to buy now or keep waiting.

Mortgage rates have moved higher again. Freddie Mac reported that the national average for a 30-year fixed mortgage reached 6.95% on September 17, up from 6.76% the previous week and 6.26% one year earlier.

That does not mean every buyer will receive a 6.95% rate. Your actual rate depends on your credit, down payment, loan type and lender. It does mean buyers should have their numbers updated before making decisions based on an earlier estimate.

The question I am hearing is understandable: Should I keep looking or wait for rates to come down?

There is no single answer. The right decision depends on what you can comfortably afford, how long you expect to stay in the home and what opportunities are available now.

Start with what the higher rate changes

A higher interest rate increases your monthly principal and interest payment. It may also reduce the price range that feels comfortable.

For example, the principal and interest payment on a $400,000, 30-year fixed mortgage would be approximately:

• $2,597 per month at 6.76%
• $2,648 per month at 6.95%

That is a difference of about $51 per month, before property taxes, homeowners insurance, mortgage insurance or association fees.

The effect becomes more significant when comparing today’s rate with rates from several months or years ago. Before touring homes or writing an offer, ask your lender to update your estimated payment and comfortable price range.

Waiting for a lower rate is still a prediction

Mortgage rates can move quickly in either direction. No one can promise when they will fall, how far they will fall or what the housing market will look like when they do.

If rates decline, more buyers may decide to restart their searches. That could increase competition for well-positioned homes.

Waiting may eventually produce a lower interest rate. It may also mean facing more competition or paying a different price for the same type of home. Both sides of that decision matter.

A higher rate can create opportunities

When rates rise, some buyers pause. The buyers who remain may encounter fewer competing offers, more time to evaluate certain properties and greater negotiating room.

Depending on the home and the seller’s position, a buyer may be able to negotiate:

• A lower purchase price
• A seller credit toward eligible closing costs
• A credit toward a temporary or permanent rate buydown, when permitted by the lender
• Repairs or other concessions
• A more favorable closing timeline

Those opportunities will not exist on every property. Some Madison-area homes can still attract strong interest, even when borrowing costs are higher.

Do not rely on refinancing later

You may be able to refinance if rates fall, but that should be treated as a future option, not the reason the purchase works today.

Refinancing is not automatic or free. It depends on future rates, your financial qualifications, the home’s value and the cost of obtaining the new loan.

Your purchase should be affordable with the payment and loan terms available now.

When waiting may make sense

Pausing may be the right decision if:

• The payment would stretch your monthly budget.
• You need more time to improve your credit or increase your savings.
• Your employment or income is uncertain.
• You are not sure how long you will remain in the area.
• You would need rates to fall for the home to be affordable.

There is nothing wrong with waiting when the numbers do not work. I would rather help a buyer adjust the plan than force a purchase that creates financial stress.

When continuing may make sense

Continuing your search may be reasonable if:

• The monthly payment is comfortable at today’s rate.
• You expect to stay in the home long enough to justify the purchase.
• You have stable income and adequate savings.
• You find a home that meets your long-term needs.
• Current conditions give you useful negotiating leverage.

The decision should be based on your finances and the specific home, not an attempt to perfectly time interest rates.

The bottom line

Higher mortgage rates matter, but they are only one part of the decision.

Before stepping away from your search, ask your lender to update your payment estimate and determine whether your comfortable price range has changed. Then compare the cost of buying now with the cost and uncertainty of waiting.

The best time to buy is not when a headline says rates are perfect. It is when the home, payment and timing make sense for you.

Written by Cait Berry, Insiders Realty. Your local Madison real estate expert helping you live, work, and play right here in Dane County.

Sources:
Freddie Mac: Primary Mortgage Market Survey
Consumer Financial Protection Bureau: Decide How Much You Want to Spend on a Home
Consumer Financial Protection Bureau: Explore Interest Rates
Consumer Financial Protection Bureau: Mortgage Rate Locks