Last year, the Federal Reserve took action to try to bring down inflation. In response to those efforts, mortgage rates jumped up rapidly from the record lows we saw in 2021, peaking at just over 7% last October. Hopeful buyers experienced a hit to their purchasing power as a result. Some decided to put a pause on their plans. Today, the rate of inflation is starting to drop. As a result, mortgage rates have dipped below last year’s peak.
While mortgage market activity has significantly shrunk over the last year, inflationary pressures are easing and should lead to lower mortgage rates in 2023. That’s good news if you are a buyer. Any drop in mortgage rates helps boost your purchasing power by bringing down your expected monthly mortgage payment. This could be just what you need to reignite your homebuying goals. While this opens up a window of opportunity for you, remember you shouldn’t expect rates to drop back down to record lows like we saw in 2021.
It’s important to have a realistic vision for what you can expect this year. That’s where I can advise you. You may be surprised by the impact even a mild drop in mortgage rates has on your budget. If you are ready to buy a home now, today’s market presents the opportunity to get a more affordable mortgage rate, find your dream home, and face less competition from other buyers.
Bottom Line
The recent pullback in mortgage rates is great news. If you are ready to buy now, holding out for 3% is a mistake.