Mortgage rates over the next few months — what to consider

If you’ve been thinking about purchasing a home, no doubt you’ve been keeping a close tab on mortgage interest rates — which have skyrocketed over the past several months.

The higher rates go, the less purchasing power buyers have and the more expensive the overall loan/financing becomes. Consider that borrowing $300,000 for a home over 30 years at 7% will cost about $1,996 a month — about $386 more than the same home and term at a 5% rate.

So how should prospective purchasers navigate the next several months? Should they postpone a transaction until rates decrease to a more affordable threshold or should they lock in a rate soon before mortgage rates go even higher?

“With the current mortgage rate fluctuations, it’s vital for prospective homebuyers to closely monitor the market over the coming months if a move is on the horizon,” suggests Martin Orefice, CEO of Rent To Own Labs. “Interest rates that are too high can have an enormous negative effect on their ultimate mortgage payments, whereas lower rates can help secure more savings over time.”

Alex Byder, the owner of BD Home Holdings, LLC, points out that a home purchase is likely the largest single transaction you will make in your lifetime.

“The mortgage rate you lock in will play a massive role in your personal finances over the next 30 years, so it’s one of the biggest decisions of your life,” he adds.

Boyd Rudy, an associate broker with Dwellings Michigan, reminds readers that markets are dynamic, and that comes with fluctuating interest rates.

“If you wait too long, you may miss out on historically low rates and end up financing your dream home at a much higher rate than expected. On the flip side, taking on a mortgage before rates level off could trap you into making more payments than necessary for years to come,” Rudy explains. “Therefore, this is an especially important time for new homebuyers to track mortgage rate activity and make more informed decisions that protect both their shortterm and long-term financial well-being.”

Diane Gonzalez, a real estate agent at Rodeo Realty in Calabasas, California, gives her clients the same advice when they ask about rates.

“Marry the house, but date the rate. If you love the home, buy it. Then, when rates go down, you can refinance to a lower rate,” she recommends.

Eric Jeanette, president of Dream Home Financing, says there are indications that mortgage rates will drop this year.

“In 2023, I’m expecting the average 30-year fixed rate to be 5.5%. This is due to the recognition by the Federal Reserve that, in 2022, their rate increases were very aggressive, and now homes are out of reach for many first-time homebuyers.”

Other experts predict a wide range of mortgage rate possibilities across 2023, with many leaning toward a 6% to 7% rate and others prognosticating rates in the 4% range.

“In the first half of 2023, many economists anticipate that the 30-year rate will range between 5.5% and 6.25%,” Rudy says.

Knowing the right time to lock in a rate will depend on your personal circumstances, timeline and urgency to purchase.

“A rate lock is a guarantee that a mortgage lender will honor a specific interest rate at a specific cost for a set period. The benefit of a rate lock is that it protects you from market fluctuations,” notes Josip Rupena, founder/CEO of Milo. “Ideally, it’s best to lock in your rate when mortgage rates are lowest as possible. Otherwise, the sooner the better is generally the best option, as rates tend to fluctuate and it’s hard to predict these fluctuations.”

For best results, consult closely with a trusted lender and your real estate agent. A financial planner can also help you forecast money matters that your mortgage will impact, too.