The housing market has been tough for buyers over the last few years. While mortgage rates were extremely low during the pandemic, increased competition from buyers, coupled with low levels of for-sale inventory, caused home prices to climb and bidding wars to become the norm. That priced out many buyers — even as mortgage rates hovered near 3%. 

Inflation then began to heat up, and the Federal Reserve raised its benchmark rate repeatedly to try and temper it. That caused mortgage rates to balloon, with rates climbing above 8% at one point in late 2023. As a result, even more potential homebuyers were pushed to the sidelines to wait for shifts in the housing market landscape. 

The good news is, though, that inflation is finally cooling. In turn, a window of opportunity is opening for buyers who want to secure an affordable mortgage loan. But if you want to capitalize on this opportunity, it could be smart to make your move now, before September rolls around. 

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3 big reasons to lock in a mortgage interest rate before September

Locking in your mortgage interest rate could be one of the smartest financial moves you make right now. Here’s why.

Mortgage rates recently hit a 15-month low

Earlier this month, mortgage rates dropped to 6.47%, down from 6.73% the week prior — their lowest point in 15 months. This created an unexpected opportunity for homebuyers to secure more affordable financing. With interest rates down, the monthly mortgage payment on a given loan amount is reduced, making homeownership more affordable. 

Lower rates also mean that many buyers can afford more house for the same monthly payment. That has the potential to open up options in higher price ranges or more desirable neighborhoods that may have previously been out of reach. 

There are also long-term benefits to consider. For example, even a small reduction in your interest rate can translate to tens of thousands of dollars in savings over the life of a 30-year mortgage loan. So if you’ve been concerned about how you can afford to buy a home in this high-rate environment, this could be the change you’ve been waiting for. 

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Buyer competition could increase soon

The Federal Reserve’s first rate cut of 2024 is expected to happen in September, and when it does, it could cause homebuyer competition to increase. After all, when the Fed slashes its benchmark rate, it’s likely to cause mortgage rates to dip as well.

While lower mortgage rates are a good thing for your wallet, they also tend to increase the competition, as many of the buyers who’ve been waiting on the sidelines will re-enter the market. But these buyers will be entering a market that already faces inventory challenges. 

And, as we’ve seen in the past, more buyers competing for a limited number of homes can lead to bidding wars and inflated prices, making it more difficult and potentially more expensive to secure your desired property. This could potentially price out you and other buyers who might have been able to afford the home under current conditions.

By locking in your rate and moving forward with your home purchase before this anticipated rush, though, you position yourself ahead of the crowd. This proactive approach could mean the difference between securing your dream home at a favorable rate and finding yourself priced out of your preferred market. 

The savings may not be worth the wait

Another reason to lock in your mortgage rate now rather than waiting is the reality of how much rates are likely to change. While there’s anticipation surrounding the Fed’s actions, the actual impact on mortgage rates may be less dramatic than some hope. 

The initial Federal Reserve rate cut is anticipated to be just 0.25%. This relatively small adjustment may not translate to a significant drop in mortgage rates. Plus, the financial markets tend to price in expected Fed moves before they happen, so by the time the Fed cuts rates, much of the impact may already be reflected in current mortgage rates. This means that the impact of a Fed rate cut on mortgage rates could be minimal.

But even if mortgage rates do decrease slightly, the potential savings need to be weighed against the risks of waiting. Is it really worth losing out on your preferred property or facing increased competition and higher home prices to get a slightly lower rate? In some cases, the opportunity cost of waiting could far outweigh any minor rate reduction. 

The bottom line

The current mortgage market presents a unique opportunity for homebuyers. With rates at a 15-month low, the threat of increased competition on the horizon and the reality that future rate drops may be minimal, the case for locking in your mortgage rate before September is strong. By acting now, you position yourself to take advantage of favorable conditions and potentially save significant money over the life of your loan.