As we step into June, homebuyers are closely monitoring the real estate market and interest rates. Despite a significant cooling, inflation remains a concern, keeping interest rates at their highest in decades. This challenging environment, coupled with limited inventory and high home prices, has made it difficult for many to purchase homes this spring.
However, June brings hope with new inflation data and a Federal Reserve announcement on rates, both set for June 12. If inflation trends lower, it could positively impact mortgage rates, offering relief to homebuyers. Conversely, if inflation remains erratic, the Fed might signal more rate hikes or maintain high rates for longer.
In this uncertain landscape, homebuyers should make informed decisions and avoid costly mortgage rate mistakes. Here are three key mistakes to steer clear of in June:
-
1. Waiting for the Fed to Cut Rates
-
2. Not Locking in a Rate Now
-
3. Not Knowing Which Loan Type to Choose
It's uncertain whether the Federal Reserve will lower the federal funds rate, which influences mortgage rates, on June 12. Most likely, the rate will remain between 5.25% and 5.50%, unchanged since last summer. Even if a rate cut occurs, it may only be a minor reduction, unlikely to significantly affect mortgage rates.
Waiting for a rate cut could backfire if rates increase or the Fed hints at future hikes, making mortgages even more expensive. Therefore, don't wait for rate cuts that might not happen.
Currently, the 30-year mortgage rate stands at 7.17%. Although higher than the record lows of recent years, this rate is not extraordinarily high by historical standards. With the possibility of rates rising further before inflation stabilizes, waiting for lower rates might be unwise.
Consider locking in the best available rate now. You can always refinance later if rates drop. Not locking in a rate today could mean facing even higher rates in the near future.
In the current mortgage rate environment, flexibility is key. Being prepared to lock in a rate quickly is crucial. Determine your preferred mortgage type beforehand, whether it's a conventional loan or an adjustable-rate mortgage (ARM), which may offer lower initial rates.
Additionally, consider buying mortgage points to secure a lower rate, especially in June. Ensure your lender knows your preferences in advance to capitalize on favorable rate changes promptly.
KreditSanta’s Final Word
In today's mortgage market, knowing what steps to take and what mistakes to avoid is essential. Homebuyers should consider locking in rates now rather than waiting for potential Fed-induced changes. Be clear about your loan type choice to act swiftly when opportunities arise. With the mid-June rate announcement approaching, now is the time for homebuyers to be proactive.