Interest rates may be high for everything from credit cards to mortgages, but they’re not going any higher — at least for September.
That was the headline this week after the Federal Reserve announced a pause in interest rate hikes. “The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run,” the Fed said. “In support of these goals, the Committee decided to maintain the target range for the federal funds rate at 5-1/4 to 5-1/2 percent. The Committee will continue to assess additional information and its implications for monetary policy.”
While the pause won’t do anything to drop rates — the benchmark rate remains at a 22-year high between 5.25% and 5.50% — it will at least give some Americans breathing room. For homebuyers, in particular, it could be especially beneficial. With mortgage rates the highest they’ve been in decades, any pause in increases is welcome. To take advantage, however, buyers should consider making some smart moves now.
Start by exploring your mortgage rate options here to see what you could qualify for.
Smart moves homebuyers can make while interest rates are paused
Here are three smart moves homebuyers can make while rates are steady.
Lock in today’s rate
Sure, rates are paused now, but all indicators are pointing toward a final increase before the end of 2023. So buyers looking to purchase a home should strongly consider locking in a mortgage rate today, even if it’s elevated compared to what they would have got a few years ago.
But the rates of 2020 and 2021 are unlikely to return anytime soon, and waiting for that to happen could be problematic. That said, today’s “high” 7% mortgage rate could be December’s low option.
Just don’t wait for that to become the reality. Take advantage of the break in hikes and lock in a rate now. You could always unlock it for a lower one in the future — or refinance your mortgage to an even better one down the road. But if you don’t take advantage of the pause now, it could cost you.
See what mortgage interest rate you’re eligible for here now.
Consider buying mortgage points
If rates are steady — for now — then consider lowering it further by purchasing mortgage points. This involves paying a fee to the lender (either upfront at closing or by rolling it into your overall mortgage loan). That fee then secures you a lower rate on your mortgage (think 6.75% with points and 7% without them now).
Just make sure to stay in your home long enough to recuperate the mortgage points cost. Otherwise, it may not be worth it for you. And be sure to weigh the costs of a potential refinance in the near term, especially if you think a refinance rate in 2024 or 2025 will be lower than what you can get with mortgage points now.
Get an adjustable-rate mortgage
An adjustable-rate mortgage isn’t for everyone. But if your ultimate goal is to secure a rate that’s as low as possible, an adjustable-rate option may be for you. The rate on this type of mortgage may be lower now than what you otherwise would be able to secure.
That said, the rate will adjust over time — likely into a higher one than you would prefer. If that happens in the future, however, you could potentially refinance to a fixed, lower rate. Do your research and speak to your lender to learn more. It could be a good alternative, especially while mortgage rates remain steady now.
Learn more about today’s mortgage options here.
The bottom line
With interest rate hikes temporarily paused, borrowers can take stock of their financial situation. And, maybe take action, too. For homebuyers, the pause could be a good motivator to lock in a rate now before they go higher toward the end of the year. But it could also be a smart time to review your mortgage point and adjustable-rate options, both of which can help secure a lower rate than otherwise available. While not ideal, all three moves could help relieve some of the burden that buyers had become accustomed to with near-constant rate increases.