Why Now Might Be the Perfect Time for Homebuyers to Lock in Their Rate

If you’ve been holding out for the "perfect" mortgage rate, now might just be the moment to make your move. Here’s why.

It’s no secret that many potential buyers have been anxiously waiting for interest rates to drop. The big question has been: how much of a change should we expect when it comes to mortgage rates and the Federal Reserve’s rate cuts?

Here’s a quick look at what’s been happening: In early November last year, the national average for a 30-year fixed-rate mortgage peaked at around 7.8%—a pretty steep number! But, thanks to recent market shifts, that rate has dropped by over 170 basis points, bringing us down to a much more manageable 6.1%, according to the Mortgage Bankers Association.

So, what does this mean in real terms? For a $400,000 loan, this rate drop could lower your monthly payment from approximately $2,879 to $2,424—a savings of around $455 per month, or about 17%! That’s not just a small change; it’s the kind of savings that can make homeownership a lot more affordable.

However, it’s important to note that this drop in mortgage costs isn’t solely due to the Federal Reserve cutting rates. The real driver of these lower mortgage rates has been the decline in Treasury yields, particularly the 10-year Treasury note. Contrary to popular belief, mortgage rates aren’t always tied directly to the Fed’s actions. Instead, they’re more influenced by Treasury rates.

So, what should buyers who are waiting for the Fed’s next move do?

While it's possible that 10-year Treasury rates could bring mortgage rates down slightly in the months ahead, don’t expect any dramatic drops. Much of the correction has already taken place. The Ameriprise Global Asset Allocation Committee is forecasting that the 10-year Treasury yield will stay around 3.75% by the end of the year, which is pretty close to where it stands now.

For buyers who have been waiting for that “perfect” rate, the current environment may be as good as it gets. The mortgage rates we’re seeing now are likely near the bottom of the current correction, with only modest relief expected.

If you’ve been on the fence, this might be the ideal time to move forward and take advantage of the savings available right now.