How homebuyers can rate-proof their budgets in a volatile mortgage market
Homebuyers face severe uncertainty this fall amid surging mortgage rates and stubbornly high living costs, but those who prepare and take stock of their finances early can shield their budgets from unexpected spikes. Last week, the average rate on 30-year fixed home loans surged to an 18-month high of 6.95%, propelled by climbing 10-year Treasury yields as the Federal Reserve increased its interest rates for the first time in three years.
These developments have made home shoppers question whether they can manage monthly payments on their purchase, as reflected in a slowdown in August’s existing-home sales. To offer jittery buyers guidance on navigating market uncertainty, Realtor.com researchers analyzed monthly mortgage rate shifts dating to 2000, establishing clear benchmarks for how much rates typically fluctuate over time—and how risk-averse buyers can adjust their budgets accordingly.
“Rate-proofing for potential buyers right now is super important because they can’t build assumptions for their finances on the chance that interest rates may go down,” Ralph DiBugnara, president of Home Qualified, tells Realtor.com.“They need to be comfortable with the monthly payment, whether the rates go down or up, and build their budgets around that.This is not a market where you can time for the best rate and the best price that’s the best fit for you.”If their purchase window extends over the next 12 months, buyers are advised to be ready for a mortgage rate to move as much as 100 basis points in either direction of today’s rate, a range that covers 80% of historical scenarios considered in the analysis. For example, if the current 30-year fixed mortgage rate is roughly 7%, a home shopper should be equally prepared for the rate to drop to 6% or surge to 8% by next September. As Realtor.com senior economist Joel Berner explains, this mathematical exercise carries major real-world consequences. For a buyer with a monthly budget of $2,000 for ...