Mortgage Rates Are Dropping. What Does That Mean for You?

Wooden houses and an easel arrow down. The fall of the real estate market. concept of value or cost decrease. low liquidity and attractiveness. cheap rent. Reduced demand and market stagnation
Dec 19, 2022 12:40 PM

by: Security First Financial, A Division of Primary Residential Mortgage, Inc.

Mortgage rates have been a hot topic in the housing market over the past 12 months. Compared to the beginning of 2022, rates have risen dramatically. Now they’re dropping, and that has to do with everything happening in the economy.


Nadia Evangelou, Senior Economist and Director of Forecasting at the National Association of Realtors (NAR), explains it well by saying:


Mortgage rates dropped even further this week as two main factors affecting today's mortgage market became more favorable. Inflation continued to ease while the Federal Reserve switched to a smaller interest rate hike. As a result, according to Freddie Mac, the 30-year fixed mortgage rate fell to 6.31% from 6.33% the previous week.”


So, what does that mean for your homeownership plans? As mortgage rates fluctuate, they impact your purchasing power by influencing the cost of buying a home. Even a small dip can help boost your purchasing power. Here’s how it works.


The median-priced home according to the National Association of Realtors (NAR) is $379,100. So, let’s assume you want to buy a $400,000 home. If you’re trying to shop at that price point and keep your monthly payment about $2,500-2,600 or below, here’s how your purchasing power can change as mortgage rates move up or down (see chart below).* The red shows payments above that threshold and the green indicates a payment within your target range.


Mortgage Rates Are Dropping. What Does That Mean for You? | MyKCM


This goes to show, even a small quarter-point change in mortgage rates can impact your monthly mortgage payment. That’s why it’s important to work with a trusted real estate professional who follows what the experts are projecting for mortgage rates for the days, months, and year ahead.



Bottom Line


Mortgage rates are likely to fluctuate depending on what happens with inflation moving forward, but they have dropped slightly in recent weeks. If a 7% rate was too high for you, it may be time to contact a lender to see if the current rate is more in line with your goal for a monthly housing expense.



*This example does not include taxes, insurance and other fees. The example is based on a 30-year fixed conventional mortgage loan for a single-family owner-occupied property with 6.0% APR - 7.50% APR, a $360,000–$440,000 loan amount, and 10% down. Rates are subject to change and are subject to borrower(s) qualification. Rates quoted are based on the examples above. Rates are subject to change and are subject to borrower qualification. 
The information contained, and the opinions expressed, in this article are not intended to be construed as investment advice. Primary Residential Mortgage, Inc and Keeping Current Matters, Inc. do not guarantee or warrant the accuracy or completeness of the information or opinions contained herein. Nothing herein should be construed as investment advice. You should always conduct your own research and due diligence and obtain professional advice before making any investment decision. Primary Residential Mortgage, Inc and Keeping Current Matters, Inc. will not be liable for any loss or damage caused by your reliance on the information or opinions contained herein.



“Mortgage Market Survey Archive: Compilation of Weekly Survey Data for 2022.” Freddie Mac, www.freddiemac.com/pmms/archive. Accessed 19 Dec. 2022.

Evangelou, Nadia. “Instant Reaction: Mortgage Rates, December 15, 2022.” National Association of REALTORS®, 15 Dec. 2022, www.nar.realtor/blogs/economists-outlook/instant-reaction-mortgage-rates-december-15-2022.

“Existing-Home Sales Slumped 5.9% in October.” National Association of REALTORS®, 18 Nov. 2022, www.nar.realtor/newsroom/existing-home-sales-slumped-5-9-in-october.

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*Opinions expressed are solely my own and do not express the views of my employer.