We are spoiled. Our family was driving through Slovakia and had to pack food for breakfast and lunch because there were no restaurants on the road for several hours. Here in America, we have become so accustomed to having multiple food options at any given time that it was strange for us to preplan for food for a day. Americans have become a little spoiled with our mortgage rates too.
I keep hearing about borrowers getting frustrated waiting for mortgage rates to drop. They currently average 6.7%, according to the Freddie Mac Primary Mortgage Market Survey. This frustration is bad news for a housing market in its fourth year of decline. I hear young people saying, “Mortgage rates are higher than they have ever been.”
Well, they aren’t.
Mortgage rate history
Here is a history lesson on what the rates were – according to the Federal Housing Finance Agency’s National Mortgage Database – for those of us who survived childhood without the internet.
- 1975: 9.5%
- 1980: 12.9%
- 1985: 13.1%
- 1990: 9.9%
- 1995: 9.2%
- 2000: 8.3%
- 2005: 5.6%
- 2010: 4.9%
- 2015: 3.6%
- 2020: 3.7%
- 2025: 6.9%
- Current: 6.71%
Best strategy
I know this sounds a lot like walking to school uphill both ways, but rates have been a lot higher than they are right now. The worst that I remember is November 1981, when mortgage rates were 18.4%. Rates aren’t historically that high; the problem is that many of us took advantage of those lower, more recent rates and locked in fixed mortgages that are hard to give up.
Most Americans feel handcuffed to stay in their current homes because they don’t think they can give up their low mortgage rates. According to the FHFA, 70% of mortgaged U.S. homeowners have a rate below 5%, about half have a rate below 4%, and 20% have a rate below 3% – and they are not moving unless they have to.
Many buyers won’t consider making a move until rates drop to 6% or below. I understand their reasoning. Buying a $400,000 home at the current 30-year interest rate costs roughly $600 more per month than it did in 2020, assuming a 20% deposit.
The reason we have fewer houses for sale isn’t that rates are in the high 6% range, but that rates were previously too low, and Americans don’t want to give up those savings. Housing experts expect rates to remain in this current range for the foreseeable future. So, waiting to move, downsize, or buy that first house might not be the best strategy. The current rate isn’t high enough to justify continuing to rent or living in a house with stairs when you need to move into a level floor plan. I am writing this a few days after shoulder surgery, so trust me when I say it’s not worth risking a fall to save a few dollars a month.
Our family finally found a town in Central Europe with a cheap hotel and a restaurant. Even though the restaurant was in an industrial park, it was good, especially for some spoiled Americans who sometimes forget how great our options usually are. The same is true with mortgage rates; maybe our current options aren’t so bad after all.
Have a blessed week.
This article was written by humans for humans because AI doesn’t have this quality of sarcasm.
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Source: 1.https://www.freddiemac.com/pmms 2. https://www.fhfa.gov/data/dashboard/nmdb-outstanding-residential-mortgage-statistics
Fervent Wealth Management is a financial management and services entity in Springfield, Missouri.