Housing Market 2024: 5 Reasons High Mortgage Interest Rates Shouldn't Scare You From Buying Now

The housing market of 2024 currently offers benefits such as greater inventory and less competition among buyers. However, high mortgage rates may make you rethink buying now. Although experts expect mortgage rates to be somewhat lower later this year, waiting may not save you much and may even make your house hunt more difficult.

Here are five reasons not to let current rates scare you away from getting your home.

1. Higher mortgage rates are not that unusual

According to Freddie Mac data, the current average interest rate for a 30-year fixed mortgage is around 6.6%. Compared to the low peak rates of 2% to 3% during 2020 and 2021, this seems very high.

However, historical mortgage rates of 6% or higher—and even double-digit rates—were actually more common. When interest rates do fall, they likely won't return to historic lows. By the end of 2024, they may remain above 6%.

2. Buying can still make more sense than renting

Depending on your area, a monthly rent payment may cost you more than a mortgage payment. Additionally, you need to consider potential rent increases and their effects on your financial stability.

Although buying involves higher expenses, you may find that it makes financial sense when you do the math. Buying a home now will also allow you to reap potential benefits like building equity, getting tax deductions, and being able to fully customize your space.

3. Later refinancing is an option

If you are financially ready to buy and can afford the mortgage payment, remember that you don't have to be stuck with a high interest rate forever. Once rates have dropped enough, you can refinance your mortgage so you can save on interest and lower your monthly payment. This option usually requires a certain amount of equity and may involve a waiting period.

In the meantime, you'll need to keep your finances in good shape because lenders look at your income, credit and debt to decide whether to approve you for refinancing. Closing costs usually also come with the process, so weighing these against potential savings and preparing for the expense will be essential.

4. Waiting may narrow your options

Waiting for better mortgage rates can limit your property options and make the buying process more complicated. While higher interest rates generally push fewer people to buy homes, the opposite happens when interest rates fall. This means you can deal with a smaller selection of homes and end up in bidding wars with other buyers.

Also, home prices may continue to rise, so the gift may require rethinking your home purchase budget. Although Fannie Mae expects only a 2.4% increase nationally for 2024, you can see double-digit increases in major cities. Especially if you want a home in a sought-after area, buying at current prices may make sense despite higher mortgage rates.

5. You have options to save money

You have several options to land a more competitive mortgage rate now. In addition to shopping around, you can choose a 15-year mortgage, raise your credit score, or buy points. A larger down payment lowers the amount borrowed and the interest paid over time, and you may avoid the additional cost of mortgage insurance.

Special mortgage programs can also help you save money. These include loans that offer discounted rates, special tax credits or payment assistance. You can try researching first home buyer programs through lenders and government agencies. Just note that income requirements and property price limits are common.