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Home buyers have been waiting literally years for some economic relief. mortgage interest rates After falling in 2020 and 2021 following the peak of the pandemic, they made the opposite movement in 2022 and 2023 due to inflation and a rise federal funds rateThe latter finally reached a range of between 5.25% and 5.50% last summer, the highest level in 22 years. mortgage interest rates followed, reaching their highest point since 2000 in August 2023.
In 2024, however, inflation has declined significantly. And that largely triggered the Federal Reserve’s decision this week to cut the federal funds rate by half a percentage point, which was a stronger move than many economists had anticipated. But even before that happened, mortgage interest rates The authorities have reacted preemptively, reaching an average of 6.15%, the lowest rate in two years. The potential for further reduction is also significant.
In this changing environment, buyers may be wondering whether to buy a home after the Fed’s sharp rate cut. Below, we detail three reasons why they might want to do so now.
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Should You Buy a Home After the Fed’s Big Rate Cut?
There are several major benefits to buying a home now, following the Fed’s rate cut. By acting now, you can:
Save money
If you bought a home this week in 2023, you would have paid 7.19% on a 30-year mortgage, according to Freddie Mac’s historical data. But you’d pay just 6.15% on that same loan if you acted now. What does that mean in dollars and cents? On a $427,000 mortgage — the average cost of a house Currently, that’s the difference between paying $2,895.54 per month and $2,601.40 per month. That’s a monthly savings of about $295, or about $106,000 saved over the life of the loan. So don’t wait.
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Less competition
While current mortgage rates are down, they’re still low compared to the sub-3% rates of 2020. So you may have less competition among buyers if you act now rather than waiting for further rate cuts. As rates drop, more buyers will inevitably enter the market, increasing competition for mortgages. limited inventory. And a bidding war for select properties could become the norm again. Acting now can help avoid this very likely scenario.
Reasonable real estate prices
Home prices are currently on the rise. But if you think that will change once rates drop and more buyers join the fray, you’re wrong. In that case, prices will likely rise even more as sellers look to capitalize on the growing buyer’s market. That will make today’s home prices reasonable compared to what they could be listed for in 2025. Those potentially higher prices could also wipe out the savings you’d get from another 50 basis point rate cut, making it more risky to wait to buy a home.
The essentials
For millions of buyers, now may be the time to buy a home. While current mortgage rates aren’t as favorable as they were a few years ago, historicallythey are still at the bottom end of the market. And by acting now, buyers can potentially save a lot more than if they had acted last September. Combined with the growing potential for increased competition between buyers and a further rise in house prices, for many, now may be the time to act.
