Waiting for Mortgage Rates to Fall Even Further? Read This Before You Decide!

The Federal Reserve just lowered rates for the first time in over three years, leaving homebuyers wondering if mortgage rates could drop even further in October—or if it’s worth waiting until November when the Feds meet again.

Here’s what you should know:
• Mortgage rates don’t follow the Fed’s decisions exactly, but they do tend to move in the same direction.

• Mortgage rates are currently hovering around 6%, the lowest in the past year.

While there’s a chance rates could drop more, big changes are unlikely unless we see improvements in the broader economy, like lower inflation or stronger employment numbers.

Here's how that all breaks down:

Mortgage Rates and Fed Decisions: A Close Relationship

Several factors influence mortgage rates, including inflation, the bond market, and the broader economy. However, directionally, mortgage rates follow Fed changes very closely. This means that when the Fed lowers rates, mortgage rates often decrease as well, offering potential savings for homebuyers.

Mortgage Rates Often Move Before Fed Decisions

Changes to the Federal Reserve’s rates are often anticipated, and mortgage rates are adjusted accordingly. For instance, if the Fed is expected to lower rates, lenders may drop mortgage rates early to stay competitive. We’ve seen this happen recently as lenders began lowering rates in anticipation of the Fed’s latest move. If inflation continues to ease, we could see mortgage rates dip even further in the coming months.

Should You Buy Now or Wait Until Late October or Possibly November?

This is the big question for many homebuyers. If you've found the right home, buying now could still make sense, especially since you can always refinance if rates drop later. It’s worth having a conversation with your mortgage professional to explore your options and find a rate and payment plan that works best for you, both now and in the future.

However, if you’re willing to wait, there’s a chance that rates could fall even more, thanks to the Fed’s ongoing efforts to manage the economy. The downside to waiting? Lower rates could increase competition among buyers and drive home prices up.

Weighing the Decision: Wait for Another Rate Drop or Buy Now?

Waiting could pay off, but it isn't without risks. When rates drop, sales activity usually increases, and with that, home prices often rise. That could mean paying more for the same home down the road. 

Let’s break down the pros and cons:

Pros of Waiting

• Potential for lower monthly payments if rates drop further  

• Opportunity to lock in a lower financing cost  

Cons of Waiting 

• Risk of higher home prices due to increased buyer competition  

• Greater demand could mean more bidding wars and limited inventory  

• Missing out on building home equity now  

• Potential costs associated with refinancing later if you choose to buy now at a slightly higher rate  

Ultimately, the best choice depends on your unique situation, and working with a professional mortgage advisor can help you assess all your options.

Our Take

While no one can predict exactly what the Fed will do next, the recent rate cut is a positive sign for homebuyers. Instead of waiting to see what might happen with rates, it's a great idea to talk with your mortgage professional now.

We can help you explore current opportunities and find the best financing options available today, making it an exciting time to move forward with your home-buying plans.