The landscape of mortgage rates over the past couple of years has been far from ideal. Following a steep decline in response to the pandemic in 2020 and 2021, rates surged in 2022 and 2023 due to inflation and an increased benchmark interest rate. Despite a slight decrease since their peak last summer, rates remain higher than desired. As of March 8, 2024, the average mortgage rate for a 30-year loan stands at 7.03%, more than double the rate from a few years ago.
However, there are still effective methods to secure a lower mortgage rate, albeit requiring additional effort and initiative from borrowers. Below, we outline three key strategies to obtain a lower mortgage rate in the current market.
1. Stay Informed and Monitor Daily Rate Fluctuations
Mortgage rates fluctuate daily, influenced by various factors. While these changes may not be drastic on a daily basis, it’s advisable to monitor rates regularly and seize favorable opportunities. With an inflation report due on March 12 and the next Federal Reserve meeting scheduled for March 19 and March 20, the rate environment is expected to undergo further changes. Staying informed about these daily fluctuations enables borrowers to act promptly when advantageous rates present themselves.
2. Act Swiftly and Be Prepared for Market Shifts
Given the dynamic nature of mortgage rates, prospective buyers must be prepared to act swiftly. External factors such as inflation reports or Federal Reserve announcements can swiftly impact rates. Therefore, buyers should anticipate these shifts and be ready to capitalize on favorable conditions. For instance, in anticipation of a potential rate hike, proactive action prior to its official announcement can prove advantageous. Failure to act promptly may result in missing out on favorable rate windows.
3. Explore Alternative Mortgage Options
Despite prevailing high rates, borrowers can explore alternative options to secure below-average rates. One approach is purchasing mortgage points, where borrowers pay upfront fees to the lender in exchange for a lower interest rate. While this requires an initial investment, it can lead to significant long-term savings. Additionally, adjustable-rate mortgages (ARMs) offer an alternative to fixed-rate options. Though ARMs entail fluctuating rates over time, they often begin at a lower rate than fixed-rate mortgages. Refinancing into a fixed-rate option before the first rate change can mitigate potential risks associated with ARMs.
In conclusion, while current mortgage rates may not mirror those of previous years, borrowers have avenues to secure competitive rates. By remaining vigilant, acting swiftly, and exploring alternative mortgage options, buyers can position themselves to secure favorable rates despite prevailing market conditions. While it may not be feasible to attain the historically low rates of the past, proactive strategies can still yield substantial savings for borrowers.
