2 Reasons Why Lower Rates Mean More Buyers

If you've delayed selling your house to make a move due to concerns about high mortgage rates, the recent decline in rates brings encouraging news. Since October, mortgage rates have consistently dropped, falling from a peak of 7.79%. In fact, they have remained below 7% for more than a month now (refer to the graph below).

While a return to the 3% range observed during the ‘unicorn’ years is unlikely, there is an expectation for ongoing declines in mortgage rates from their current levels in the near future. Senior Economist at the Center for Economic Research, Dean Baker, sheds light on this:

"It seems evident that mortgage rates are on a downward trajectory once more. While it's unlikely for them to reach the lows seen during the pandemic, there is a possibility of rates dipping below 6.0 percent soon, a figure considered low in comparison to pre-Great Recession standards."

Here are two reasons why this ongoing trend, along with the anticipation of its persistence, brings positive news for you.

High Mortgage Rate: Options You Might Not Know About

For months, homeowners felt anchored to their existing mortgages, shackled by historically high rates. Moving meant potentially swapping that hard-earned low rate for something closer to a heart-stopping 8%! But buckle up, because the tide has turned! Mortgage rates have plummeted, freeing you from that feeling of being locked-in. Now, exploring a new home doesn't have to come at the cost of sacrificing your sweet, low mortgage.

However, with rates dropping, the difference between your current mortgage rate and the new rate you'd be taking on isn't as substantial as it once was. This makes the prospect of moving more affordable than it was just a few months ago. According to Lance Lambert, Founder of ResiClub:

"We could be experiencing the pinnacle of the 'lock-in effect.' Certain sellers looking to upgrade or change their lifestyle may be acknowledging that the days of 3% and 4% mortgage rates are unlikely to return anytime soon."

Anticipate an Increase in Market Entrants among Buyers

Based on data from Bright MLS, the primary factor deterring potential homebuyers from entering the market has been the presence of elevated mortgage rates (refer to the graph below):

Reduced mortgage rates present an opportunity for buyers to potentially save on their home loans, enhancing the appeal and affordability of homeownership. With the easing of rates, there's a likelihood that more buyers will feel prepared to reenter the market and pursue their home purchase. An increased number of buyers translates to heightened demand for your house.

Bottom Line

If you've been hesitating to sell due to concerns about accepting a higher mortgage rate or the perceived absence of potential buyers, the recent drop in mortgage rates could be the signal that it's the right moment to take action. When you're prepared, reach out to a nearby real estate agent.