The housing market landscape has been challenging for buyers to navigate over the past few years. After all, a perfect storm of high mortgage rates, limited home inventory and elevated home prices has created significant barriers to entry for those looking to purchase a home. With homebuying costs elevated, many potential buyers have been temporarily priced out of the market, leaving them wondering when, if ever, they might be able to achieve their dream of homeownership.

But while the housing market hasn’t been friendly to buyers recently, there are signs that the tide may be turning. In particular, there are economic indicators suggesting relief from high rates could be on the horizon. Not only has inflation cooled to just above the Federal Reserve’s 2% target rate, but the job market is slowing down, too. In response to these developments, the Federal Reserve is finally expected to start implementing rate cuts, with the first one expected at the upcoming Fed meeting that concludes on September 18.

These economic shifts also make it more likely that the Fed will implement more rate cuts in the coming months. Such a move would likely have a significant impact on mortgage rates, potentially opening up new opportunities for homebuyers who have been sidelined by high borrowing costs. With this in mind, it’s helpful to understand how the upcoming rate cuts could affect the cost of a typical mortgage loan, such as one for $600,000.

Don’t miss out on borrowing at an affordable rate. Compare your top mortgage loan options online now.

How much will a $600,000 mortgage cost monthly after rates are cut?

To understand the potential impact of rate cuts on mortgage costs, let’s first look at what a $600,000 mortgage would cost at today’s average mortgage rates, which are 6.41% for 30-year fixed mortgage loans and 5.78% for 15-year fixed mortgage loans (as of September 13, 2024).

These figures represent the monthly payments for principal and interest only, assuming a 20% down payment (of $120,000) has been made. It’s important to note that actual monthly payments would be higher when factoring in property taxes and homeowners insurance, which vary by location and other factors.

• 15-year mortgage at 5.78%: $3,993.68 per month
• 30-year mortgage at 6.41%: $3,005.57 per month

If the Federal Reserve implements a 0.25% rate cut at its upcoming meeting, and assuming mortgage rates follow suit and drop by the same 25 basis points (though there isn’t always a direct correlation), here’s how the monthly payments might change:

• 15-year mortgage at 5.53%: $3,929.65 per month
• 30-year mortgage at 6.16%: $2,927.40 per month

In this scenario, borrowers could save approximately $64 per month on a 15-year mortgage or about $78 per month on a 30-year mortgage. 

If the Fed were to implement multiple rate cuts totaling 0.50% over the coming months, and mortgage rates were to fall by same 50 basis points, the potential savings become even more substantial:

• 15-year mortgage at 5.28%: $3,866.19 per month
• 30-year mortgage at 5.91%: $2,850.13 per month

With a half-point reduction in rates, borrowers could see monthly savings of about $132 on a 15-year mortgage or about $155 on a 30-year mortgage compared to current rates.

It’s worth noting that these calculations are based on the assumption that mortgage rates will move in tandem with Fed rate cuts. In reality, the relationship between Fed rates and mortgage rates is more complex, and other factors can influence mortgage rates as well.

Find out how affordable the right mortgage loan could be now.

Should you wait for rates to drop to buy a home?

The prospect of lower mortgage rates can be appealing, but the decision to wait for rates to drop before buying a home isn’t always straightforward. There are several factors to consider, including:

• Monthly payments: If you’re currently stretching your budget to afford a home at today’s mortgage rates, waiting for a rate cut could make homeownership more affordable and sustainable for you in the long run.
• Buying power: Lower rates mean you might be able to afford a more expensive home while keeping your monthly payments the same, potentially opening up more options in your desired neighborhoods.
• Competition: Lower rates typically bring more buyers to the market. This increased demand could lead to more competition for available homes, potentially resulting in bidding wars.
• Home price appreciation: As more buyers enter the market due to lower rates, home prices could rise. The money you save on interest might be offset by having to pay a higher purchase price for your desired home.
• Timing: While rate cuts are expected, their exact timing and magnitude are not guaranteed. Waiting for the perfect rate could mean missing out on good opportunities in the meantime.
• Opportunity cost: If you’re currently renting, every month you wait is another month of paying rent instead of building equity in a home.

The bottom line

Waiting until rates drop to buy a home could lead to savings of between $64 and $155 per month on a $600,000 mortgage (depending on the loan term and other factors). While the monthly savings can add up over time, the decision to buy now or wait for lower rates depends on your circumstances. If you find a home and can comfortably afford the payments at current rates, it might make sense to move forward rather than risk losing the opportunity. On the other hand, if a small reduction in rates would make a significant difference in your ability to afford a home, waiting could be the prudent choice.

We may receive an affiliate commission from anything you buy from this article.

In her revealing new memoir, “Something Lost, Something Gained: Reflections on Life, Love, and Liberty” (to be published September 17 by Simon & Schuster), former first lady, senator and secretary of state Hillary Rodham Clinton writes of how – as in a Joni Mitchell song – she has looked at life and love “from both sides now.”

Read an excerpt below, and don’t miss Erin Moriarty’s interview with Hillary Clinton on “CBS Sunday Morning” September 15!

“Something Lost, Something Gained” by Hillary Rodham Clinton

Prefer to listen? Audible has a 30-day free trial available right now.

She held court like a queen. As I watched Joni Mitchell at the Grammys in 2024—singing from a lavish armchair that looked like a golden throne and, as one critic put it, “wielding a cane like a scepter”—the word that kept coming to mind was “regal.” Mitchell was eighty years old, and in 2015, she had suffered a debilitating brain aneurysm that left her virtually unable to speak, let alone sing. Yet she fought back, and now here she was, performing her spellbinding song “Both Sides Now.” Many of the music world’s biggest stars listened in rapt attention. At home, I too was on the edge of my seat.

I’ve been a Joni Mitchell fan since the 1960s. There were two wonderful early versions of “Both Sides Now,” one from Mitchell, who wrote the song, and a cover by the great Judy Collins. I thought both were terrific, although at that point I had more questions than answers about life and I didn’t really know what it meant to be in love. It was still a few years before I would meet the tall, red-bearded law student who couldn’t stop talking about Arkansas. But I was the right age to be captivated by a song about how the passage of time can bring a new perspective on life and love.

It was a heady, anguished, exhilarating time to be a college student. The Vietnam War was raging. Protests for peace, civil rights, and social justice were swelling. The innocence and illusions of childhood were falling away. “Tears and fears and feeling proud,” as the song goes. Like so many in my generation, my eyes had been opened to a darker side of American life, to injustice, corruption, assassinations, and war. At Wellesley College and then Yale Law School, I joined protests and marches, read everything I could get my hands on, and stayed up late into the night discussing the fate of the world with my classmates. Some days it felt as if looking “at life from both sides now” gave me enormous clarity—about right and wrong and what it would take to make progress; other days, it just felt confusing. When Mitchell sang, “I really don’t know life at all,” she was speaking for many of us. The mix of emotions she captured felt so specific to our time and place, but also timeless. Most young people leaving behind adolescence and grappling with adulthood have felt some version of it.

Later, Mitchell came to occupy a special place in my family’s life. In 1978, I was walking down the King’s Road in the Chelsea neighborhood of London with Bill (who looked less like a Viking but was still quite excited about Arkansas), when we heard Judy Collins’s cover of Mitchell’s “Chelsea Morning” wafting from one of the storefronts. Bill started singing along. “If we ever have a daughter, we should name her Chelsea,” he said. Two years later we did.

We had our share of “dreams and schemes and circus crowds.” Then one day I looked up and I was seventy-six. There was Joni Mitchell again, singing on my television, her voice deeper and world-weary but unmistakably hers. The old words took on new meaning. Gone was the twentysomething shaking off the rose-colored glasses of a love affair and the illusions of adolescence, and in her place was a matriarch reflecting on the hard-earned wisdom of a long, eventful life.

Oh, but now old friends, they’re acting strange
And they shake their heads and they tell me that I’ve changed
Well, something’s lost, but something’s gained
In living every day.

It felt like I was listening with new ears, almost as if I were hearing the song for the first time.

Personally and professionally I’ve come through so many highs and lows, times when I felt on top of the world and others when I was in a deep, dark hole. After all these years, I really have looked at life and love “from both sides now.” How do you tally up and reckon with the losses and gains of a life? Or of a nation and a world? These are questions with often incomplete, unsatisfying, or missing answers.

Old wounds still hurt, but I have a new sense of proportion. Time will do that. I look back on things that used to feel monumental, existential even, with clearer, calmer eyes. Rivals like the Bushes and the Obamas have become friends. The cut-and-parry of politics matters less, but the check-and-balance of democracy matters more. And little moments now loom large. Hugging my daughter, holding my husband’s hand, making my grandchildren laugh with a silly knock-knock joke, going for long walks and afternoon swims. Glorious grandmother days with “ice cream castles in the air / And feather canyons everywhere.”

But loss is also an ever-present companion. “So many things I would have done / But clouds got in my way.”

     
Excerpted from “Something Lost, Something Gained: Reflections on Life, Love, and Liberty” by Hillary Rodham Clinton.  Copyright © 2024 by Hillary Rodham Clinton.  Reprinted by permission of Simon & Schuster, Inc. All Rights Reserved.

Get the book here:

“Something Lost, Something Gained” by Hillary Rodham Clinton

Buy locally from Bookshop.org

For more info: