After historically low mortgage rates during 2020 and 2021, 2022 saw them rise significantly as the Federal Reserve did its best to help mitigate the effects of pandemic-induced inflation. Whether government fiscal policy was executed correctly is up for debate, but one thing we know for sure is that interest rates are trending back down.
It’s anyone’s guess as to whether those interest rates will reach their pandemic and pre-pandemic lows, but if you’re looking to get into a new house or refinance, it’s essential to know what declining rates mean to you. Let’s take a look at how declining interest rates affect homebuyers and how you can be better prepared to pounce when the moment is right.
What to Expect for Rates in 2023
Interest rates, after hitting all-time lows, rose to a point where they were unfavorable for homebuyers during the better part of last year. Compound that with high home prices, and things looked grim for potential buyers. What this means, though, for those seeking to refinance or buy is that timing will be essential. We expect to see mortgage rates continue to moderate and decline as the year goes on.
But are dropping interest rates appealing enough to take out a mortgage in 2023? Chances are, yes, rates will drop back into a reasonably more affordable realm which means homebuyers looking to take advantage of better rates will need to prepare themselves for when rates hit their bottom.
Get Ready for Dropping Interest Rates
Pulling the trigger on a new mortgage or refinance right now may not necessarily be the right time or the right rate, but being prepared for when things drop will be a major part of your plans for buying in 2022. Preparing for dropping interest rates means more than watching how the Fed and other financial powers that be manipulate the marketplace.
Instead, do your best to prepare financially and build your personal financial portfolio for the right opportunity to take out a mortgage. Doing so now, even if rates don’t drop for several months, will have you in a better position to purchase a home and take advantage of a mortgage when the time is right.
How to Prepare for Declining Rates
First and foremost, go ahead and get in touch with a lender. Your lender is your go-to for all things related to declining interest rates and will be a major asset when the time comes. Your lender will likely guide you and give you advice throughout the process, but making that first point of contact will be integral to taking advantage of lowering rates.
Once you’ve made contact with your lender, it may be time to go ahead and start applying for mortgages. The mortgage lending process can take several weeks to several months depending on market conditions and the time of year, so applying early and getting pre-qualified for a mortgage will go a long way in getting you approved for a better interest rate.
Finally, take some time to clean up any loose financial ends before you get too deep into the lending process. If you have outstanding credit balances from the holidays or maybe skipped some payments for one reason or another, be sure to get everything back on track and improve your credit standing. The better your financial picture, the more likely you are to get the best possible interest rate.