The past few years have presented significant challenges for homebuyers seeking affordable mortgage options. As the Federal Reserve raised rates to try and temper inflation, mortgage interest rates skyrocketed in tandem, climbing from record lows below 3% during 2020 and 2021 to over 8% in late 2023. That, in turn, drastically altered the landscape of home affordability. 

After all, higher rates translate to more expensive loan payments, which priced many would-be buyers out of the market. But the sharp rate increase was also coupled with elevated home prices, which had a profound impact, pushing homeownership dreams further out of reach out of reach for many.

However, recent economic shifts have brought renewed hope to the housing market. With inflation cooling, mortgage rates have been on a gradual descent, recently hitting a 15-month low. This development is making it more feasible for buyers to re-enter the housing market. But the question remains: Should you lock in a rate this September, or is it better to wait?

See how low of a mortgage interest you could secure here.

Should you lock in a mortgage interest rate this September?

While every buyer’s situation is unique, there are a few compelling reasons why locking in a mortgage rate this September could be a prudent move:

Rates are poised to drop again

While the Federal Reserve’s benchmark rate is currently paused at a 23-year high, most analysts agree that the first rate cut of the year is on the horizon. The Fed has also signaled its intention to cut interest rates starting in September. While the Fed’s actions don’t directly set mortgage rates, they do impact the overall interest rate environment, which in turn affects mortgage pricing.

That rate cut isn’t slated to occur for another few weeks (the Fed meets next on September 17 and September 18), but the anticipation of a rate cut can create favorable conditions in the mortgage market even before the actual cut occurs. Lenders often start adjusting their rates in advance of Fed actions to stay competitive in a changing market.

That’s part of why we’ve seen mortgage rates fall over the last couple of weeks — and for homebuyers, these anticipatory rate drops present an opportunity. By locking in a rate now, you could potentially benefit from the current rates, which may already be factoring in the expected Fed cut. Plus, if rates do drop further after the Fed’s action, many lenders offer a “float down” option that allows you to take advantage of lower rates even after locking (though this often comes with a fee).

Find out how low your mortgage rate could be now.

Today’s rates are still drastically lower than recent peaks

Even if the Federal Reserve’s actions don’t significantly impact mortgage rates in September, it’s worth recognizing that today’s mortgage rates are still lower than they were just a few months ago — and are substantially lower than they were about one year ago. This presents significant savings opportunities for buyers. Let’s look at a concrete example to illustrate the potential savings:

Assume you’re looking to buy a $300,000 home with a 30-year fixed-rate mortgage and a 20% down payment:

• At the peak mortgage rate of 8% in late 2023, your monthly payment (principal and interest) would have been about $1,761.
• With today’s mortgage rates around 6.5%, that same mortgage would cost about $1,517 per month.

This difference of $244 per month translates to savings of $2,928 per year, or about $87,840 over the life of the loan. These figures don’t include property taxes and insurance, which would be the same regardless of the interest rate.

By locking in a rate now, you can secure these types of savings. It’s also worth noting that today’s mortgage rates aren’t that high comparatively. While a mortgage rate of 6.5% is certainly higher than the 3% rate you could have secured a few years ago, today’s mortgage rates are still historically competitive when looking at trends over the past few decades.

Buyer competition is still low

Buyer competition tends to tick back up in a low-rate environment, making it more difficult, and more expensive, to buy a home. But buyer competition is still low right now, according to recent data from Redfin. Not only did sales of existing homes fall 2% year over year in July, according to Redfin, but pending sales were also down 3% month-over-month and 6% year-over-year — the biggest drops in nearly a year. These statistics indicate that there’s reduced buyer activity in the market. 

That, in turn, presents an opportunity for those ready to enter the market. By securing a mortgage rate now, you can take advantage of this temporary lull before competition potentially heats up again. This window may close quickly though as mortgage rates continue to fall and more buyers re-enter the market.

The bottom line

This September presents a unique opportunity for many potential homebuyers. With rates lower than recent peaks, the possibility of further rate drops on the horizon and reduced buyer competition, now could be an ideal time to secure your mortgage rate. Just remember that it’s important to carefully consider your financial situation, long-term plans and local market conditions before making a decision.