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Ask the expert: are current mortgage rates too high?
Q: I just missed on buying a house last fall when mortgage rates were really low. Now that they are back up above five percent again, how long do you think I should wait to see if they have another swing lower?
A: How quickly perceptions change! Current mortgage rates are at 5.05 percent. At just about any other time during the past 40 years, a 5.05 percent mortgage rate would have been considered an incredible bargain. Now though, with 30-year mortgage rates having spent much of the past two years below 5 percent, people are writing articles lamenting the end of an era because current mortgage rates are once again north of that mark.
If you can afford a house now and buying one fits with your plans, then here are three reasons you shouldn't wait for mortgage rates to dip back down:
- There is no guarantee that mortgage rates will fall below 5 percent again. Until 2009, they had never done that before (at least not in the modern era), so don't hold your breath waiting for it to happen again.
- Housing itself is relatively cheap. Remember, there are two components that determine your mortgage payments--the interest rate and the price you pay for the house. With home prices down in many parts of the country, you may not want to wait too long.
- The main thing is whether you can afford a mortgage now. Whether you could have done better a few months ago is immaterial--water under the bridge.
The bottom line is that for most people, buying a house should be about obtaining affordable long-term shelter, not about trying to time an investment just right. If current mortgage rates cannot make housing affordable to you, it is a sign you need to wait and save more money, rather than a sign you should wait for lower mortgage rates.
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