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Why Mortgage Rates Trending Down Raises Hopes For Homebuyers
Despite signs of improvement in the economy in the wake of the pandemic, mortgage rates on new homes continue to decline.
In the wake of the COVID-19 pandemic, the real estate market strongly favored sellers as potential homebuyers leaped into multi-offer standoffs to panic buy homes from a limited inventory of real estate. But as the economy began showing signs of improvement and the panic wore off, the housing market started putting the power in the hands of the homebuyer. Now house hunters have another win, as mortgage rates are continuing to fall despite rising inflation and an improving economy.
According to data that was recently released by Freddie Mac, the 30-year fixed-rate average on a mortgage dropped to 2.78%, with an average 0.7 point. Just a week prior, that number was 2.9%. A year ago the average rate on the same mortgage was 2.98%, which shows mortgage rates are lower when compared to recent data from this year as well as data from the same time last year when we were in the height of the pandemic. Although the average rates for a 30-year-fixed mortgage briefly rose to 3.18% in April of this year, they have since fallen 30 basis points. The 15-year fixed-rate average is currently around 2.12% when it was 2.48% at this time a year ago.
While we aren’t sure when mortgage rates will start to rise again, we all know they can’t decline forever. Real estate experts noted that the combination of mortgage rates falling while inflation is skyrocketing is extremely unusual, and can likely be attributed to the damage done to the economy during the pandemic in 2020. But as the economy recovers, it wouldn’t be shocking to see mortgage rates start to rise again. This means that potential homebuyers who have decided to bide their time as the real estate market shifts away from being a seller’s market may want to reconsider so they can take advantage of these low mortgage rates while they still can.
Buying a home while mortgage rates are declining puts the homebuyer at a huge advantage. Lower mortgage rates mean that your monthly payment will also be lower than what you would typically expect to see when purchasing a home. This gives you more funds to put into savings, pay off other debts, or to devote to entertainment, vacations, or home improvement projects. Similarly, a lower rate could also mean you pay thousands of dollars less in interest over time. Since lower mortgage rates essentially let you get more bang for your buck, you may also be able to buy a larger home or purchase in a more desirable neighborhood. If you aren’t planning to move now, this may be a good time to try to refinance your current mortgage to reap the benefits of lower rates.
Of course, lower mortgage rates do reintroduce competition into the real estate market as homebuyers try to take advantage of current market conditions. That said, it doesn’t mean it’s impossible to buy a new home. Here at DABL, we have all the tips and tricks you need to stand out as the perfect homebuyer. If you’re selling your house, don’t lose hope either. Your house may seem more attractive to potential buyers who want to take advantage of the low mortgage rates right now, and we have plenty of strategies to encourage interested parties to fall in love with your home through smart home staging and curb appeal.
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