Will Mortgage Rates Drop Enough To Wait? Here’s What Experts Say
A lot of buyers are holding off, hoping mortgage rates will take a significant dip before they jump into the market. But is that a realistic expectation? According to the latest expert projections, rates are expected to decrease—but not as much as many people had hoped.
What’s the Latest Mortgage Rate Forecast?
A few months back, industry experts were predicting mortgage rates might dip below 6% by the end of the year. However, more recent forecasts suggest that’s unlikely.
While rates are still expected to come down later this year, updated projections from Fannie Mae, the Mortgage Bankers Association (MBA), and Wells Fargo indicate they’ll likely settle somewhere in the 6.5% to 7% range (see graph below).
So, if you’ve been waiting for a major drop before buying, you might be holding off longer than anticipated. And if life circumstances—like a new job, growing family, or another big change—are pushing you toward a move, waiting indefinitely may not be the best strategy.
Ways to Make Buying a Home More Affordable Now
Since a dramatic rate drop isn’t on the horizon, it may be time to consider other financing options that could help make homeownership more affordable now. Here are three strategies worth discussing with your lender:
1. Mortgage Buy Downs
A mortgage buy down allows you to pay an upfront fee to temporarily reduce your mortgage rate, which lowers your monthly payments early on. This strategy is gaining popularity—27% of agents report that first-time homebuyers are negotiating buy downs from sellers to help ease affordability challenges.
2. Adjustable-Rate Mortgages (ARMs)
ARMs often start with a lower interest rate than a traditional 30-year fixed mortgage, making them a great option if you anticipate refinancing once rates drop.
And if you’re worried about ARMs because of the 2008 housing crash, today’s versions are much more secure. Lance Lambert, Co-Founder of ResiClub, explains:
". . . ARM products today are different from many of the products issued in the mid-2000s. Before 2008, lenders often approved ARMs based on borrowers' ability to pay the initial lower interest rates. And sometimes they didn’t even check that (remember Ninja loans). Today, adjustable-rate borrowers qualify based on their ability to cover a higher monthly payment, not just the initial lower payment."
Translation? Unlike in the past, lenders now verify income, assets, and employment to ensure borrowers can afford the loan—even after the rate adjusts.
3. Assumable Mortgages
An assumable mortgage allows buyers to take over the seller’s existing loan—keeping the original interest rate intact. This can be a huge advantage, considering over 11 million homes currently qualify for assumable mortgages. If a lower rate is your goal, this is a financing strategy worth exploring.
Bottom Line
Waiting for mortgage rates to drop significantly might not be the best plan. Instead, exploring options like buy downs, ARMs, or assumable mortgages could help make homeownership more affordable right now. If you're thinking about buying, reach out to a local lender to see what strategies might work best for you.
