Many potential homebuyers are struggling in today’s real estate market for a variety of reasons. Not only is inventory extremely limited, making it difficult to find a suitable home, but property values have skyrocketed over the past year. This results in many shoppers getting prices outside of neighborhoods that they could normally afford in a good position.
The reason for the high home prices is the increasing demand. Many buyers are looking to buy a home this year to take advantage of current mortgage rates, which are historically very low.
But here is some good news for home buyers who may be thinking of putting their home hunting on hold. Freddie Mac now predicts that the average mortgage rate on a 30-year fixed loan will be 3.7% in 2022. And while that’s currently a little higher than the average interest rate, it’s still a very competitive interest rate.
Should you postpone buying your home until 2022?
At the moment, the supply of available apartments is simply not big enough to meet buyer demand and that leads to higher prices. Many listed houses today get into bidding wars in which two or more buyers compete against each other to make the highest offer. And that leaves buyers with a limited budget out in the rain.
However, one big reason to move ahead with your home search today is to take advantage of the super low mortgage rates. But if prices stay competitive over the next year, 2022 could be a better time to buy. At that point, we could see a lot more inventory entering the property market and once that happens prices could come down.
As of this writing, the average 30 year mortgage rate is 3.105%, which is what Freddie Mac projected as the average rate for the full year 2021. If you were to take out a 30 year mortgage of $ 300,000 at 3.105%, your monthly payment of principal and interest on your loan would be $ 1,282. (Note that your $ 1,282 doesn’t include external charges like property taxes and home insurance.)
Let’s say you would wait until next year to buy a home when the interest rate on the same loan amount with the same term could be 3.7%. In that case, your monthly principal and interest payment would be $ 1,380. That’s more money every month. But if house prices drop sharply in the next year, you can potentially get a lot more home on that $ 300,000 mortgage. Or you could get away with less credit.
And if home prices dropped enough that you could cut your mortgage to $ 250,000 3.7% over 30 years, your monthly principal and interest payments would be $ 1,150. This means that even if your mortgage interest rate was higher, you would save money.
That said, just because Freddie Mac expects the average 30-year loan to be 3.7% over the next year doesn’t mean it’s guaranteed. But what it does mean is that if you are frustrated with your apartment hunt, it could be time to pause them and try again in 2022. and you can even get a much better deal on a home.
A historic opportunity to potentially save thousands on your mortgage
The chances are good that interest rates will not remain at a low of several decades for much longer. This is why it is important to act today, whether you are looking to refinance and cut your mortgage payment or are ready to pull the trigger when buying a new home.
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