What You Need to Know About Interest Rates

Everything you need to know about today’s interest rates and affordability.

The topic on most people's minds right now is interest rates, so I am here to provide some information to help you understand what's happening. First, it's important to note that mortgage rates aren’t directly tied to the Fed's interest rates, although they are correlated. 

Over the past 12 months, interest rates have risen. Due to this, many people are waiting for rates to decrease before they consider buying a home. This is because the average interest rate over the past ten years has been around 3.8%. 

However, if we look back to the 1990s, the average interest rate was around 6%. That's a good interest rate and still allows for forward momentum in real estate. When I purchased my first home, the interest rate was 6%, and we felt great about it. Going even further back, if we consider all of the available data, the average interest rate for mortgages since 1972 is 7.8%.

It's essential to keep these historical rates in mind because they provide context for where we are now. Interest rates are currently in the high 6% to low 7% range, which is much lower than the 16% rate my parents faced when they bought their first home. Therefore, instead of focusing solely on the interest rate, you should consider affordability. What monthly payment can you comfortably afford? The interest rate will affect your monthly payment, so that's what you should concentrate on. 

"Owning a home is always a better option."

When you buy a home and lock in an interest rate, you also lock in a payment. If you continue to rent, your rent will increase over time. As a homeowner, your payment won't change much unless taxes increase. Therefore, owning a home is always a better option. If you have any questions about interest rates or anything related to real estate, feel free to ask me. Call or email me anytime—I’m always happy to hear from you.