Mortgage rates declined to their lowest levels in more than a year, now averaging at around 6.19% for a 30-year fixed rate loan, according to the latest Freddie Mac data. Some lenders are even touting 30-year rates below 6% for qualified borrowers with high credit scores and a low debt-to-income ratio. (You can see some of the lowest mortgage rates you may get now here, from our partner Bankrate.) But how important are low rates, really? And how much are people saving over the long term?
In the near term, a full percentage point can mean a lot when it comes to paying off a 30-year mortgage. A home purchased at the current average of $512,800 with 20% down faces a monthly payment of around $2,914 at 6.19%, according to a Bankrate mortgage calculator. Lock in at a full percentage point lower at 5.19% and borrowers can shave off more than $250 per month. Over the course of 30 years, that single percentage point would save $90,000.
To find out just how important locking in a low mortgage rate really is for both buyers and sellers, we decided to ask the experts. Here’s what five financial advisers and mortgage pros say you need to know about mortgage rates ahead of close.
‘Marry the house, date the rate,’ says Marcos A. Segrera, a certified financial planner, wealth manager and principal at Evensky & Katz/Foldes Wealth Management.
“Marry the house, date the rate. This is the single most important concept we share with clients,” says Segrera. “Life events — a growing family, a new job — are the true drivers of a home purchase. A house is a foundational, long-term asset that serves your life goals. A mortgage rate is simply a financial tool that is temporary and can be changed in the future.”
‘Refinancing down the road can help manage costs as rates normalize,’ says Nathan Sebesta, a CFP and licensed insurance agent with Access Wealth Strategies.
“Mortgage rates do matter, but they are not the only variable in the decision,” says Sebesta, adding that “high rates should not automatically deter someone from moving forward if the timing is right for their family and finances. A common misconception is that buying at a high rate locks you in forever. In reality, refinancing down the road can help manage costs as rates normalize. For clients leaving behind low rates, the key is running the numbers: will the new home and lifestyle justify a higher monthly payment? For others, staying put and making improvements may make more sense. The bigger conversation is about total affordability, cash flow, and long-term goals, not just interest rates in isolation.”
‘The key is patience,’ says Michael Hills, vice president of Atlas Real Estate.
“Most Americans don’t have a long-term perspective,” says Hills, adding that sellers worried about taking a loss in a pricy housing market can still “make it back on the buy side and recoup that money in the future. It could be two days or 22 years, but if you buy in one of the markets where there’s net positive in migration — that means people are moving there — prices will go up over the long term. In this world the key is patience.”
‘Buying too much home can inhibit reaching other savings and investing goals,’ says Ben Bolen, a CFP with University Investment Services.
“If rates fall, demand tends to rise, and with today’s limited supply, that usually means higher home prices. In many cases, the savings from lower rates are offset by increased purchase costs,” says Bolen, adding that, for existing homeowners, “refinancing can be a smart strategy to lower interest costs and total debt.”
“Where I urge caution is with cash-out refinancing. Used wisely, pulling equity can help consolidate high-interest consumer debt or fund improvements that increase a home’s value. Where people get hurt is using the cash as a debt band-aid, but not addressing the root cause: too much spending and not following a budget. Lastly, although a home can be a wealth-building tool, buying too much home can inhibit reaching other savings and investing goals, regardless of how low the rates are.”
‘Rate drops of any kind will spell minimal reprieve,’ says David Gottlieb, wealth manager at Savvy Advisors.
“The importance of mortgage rates does hold weight in seller/buyer behavior, but its influence is clouded by other factors,” says Gottlieb. “My personal view is actually quite pessimistic in the short term,” he adds. “I personally believe that rate drops of any kind will spell minimal reprieve for the challenging environment we currently face. Instead, for the supply and demand dynamic in the housing market to return to ‘normalcy,’ listing prices will likely need to fall unless unemployment trends reverse, interest rates keep declining, and income growth begins to outpace rising homeowner costs, something we haven’t seen in decades.”