If you’ve been watching mortgage rates like a hawk, you’re not alone. At the time of this article being written, the average 30-year fixed rate is 6.01 percent. The week prior it was 6.09 percent and last month it averaged 6.04 percent, according to Freddie Mac’s mortgage tracking. That’s a lot of decimal points but what does it actually mean for your wallet?
Let’s break it down per $100,000 borrowed on a 30-year fixed mortgage.
At 6.01 percent, the principal and interest payment is approximately $600 per month per $100,000 borrowed. At 6.09 percent, that payment rises to about $606. At 6.04 percent, it sits around $602. We are talking about a swing of roughly $4 to $6 per month per $100,000 financed.
So, on a $400,000 loan, the difference between 6.01 and 6.09 percent is roughly $24 per month. That’s not nothing – but it’s hardly life-changing. It’s the cost of a couple of streaming subscriptions or, yes, a handful of Starbucks coffees.
Now let’s zoom out further. A year ago, the average 30-year fixed rate was about 6.85 percent. At 6.85 percent, the principal and interest payment jumps to roughly $655 per month per $100,000 borrowed. Compared to today’s 6.01 percent rate at $600 per $100,000, that’s about a $55 monthly difference per $100,000.
On a $400,000 loan, that’s roughly $220 more per month than today’s rate. Now that’s meaningful.
Here’s the reality: If you’re waiting for a drastic downward shift in mortgage rates, history suggests you may be waiting a long time. Rates move in cycles and, while we may see minor fluctuations up or down, the days of 3-percent mortgages were the exception, not the norm. Sitting on the fence hoping for a dramatic drop could mean missing out on inventory that’s tightening right now.
And here’s the other side of the coin: What happens if rates tick back up? If we move from 6.01 percent toward the high 6-percent range again, your buying power shrinks immediately. You either qualify for less house or you pay more per month for the same property. Meanwhile, competition can increase as buyers jump back in at the first sign of rate relief, pushing prices higher.
The question becomes less about shaving a few dollars off your payment and more about timing the right home, in the right neighborhood, at the right price. A difference of $5 per $100,000 borrowed is not typically what makes or breaks a long-term financial decision. But missing a property that fits your needs because you were waiting for a tenth of a percent? That can cost far more over time.
Housing inventory is tightening in many markets. When supply shrinks, prices tend to firm up. Waiting for perfection in an imperfect market can mean watching opportunities pass by.
If you’re financially ready, secure in your job and planning to stay put for several years, the difference between 6.01 and 6.04 percent shouldn’t be the reason you don’t buy. Because while you’re waiting for rates to drop another fraction, the market may move in the opposite direction.
Sometimes the bigger risk isn’t buying at 6 percent. It’s waiting for 5 percent and ending up at 7 percent.
Theresa Grant is a real estate broker and columnist covering Lake Arrowhead, Crestline, Running Springs, and the surrounding mountain communities. Reach her at (909) 442-1345 visit www.HomesInLakeArrowhead.com, and follow her on social media @TheresaGrantRealtor. Theresa is a Broker Associate with REAL Broker Technologies. DRE#01202881.
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