Timing Is Crucial When It Comes To Mortgage Rates

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Since a weak jobs report in early September, mortgage rates have fallen sharply. For prospective homebuyers and refinancers, it’s a nerve-racking moment. Will rates keep dropping? Or will they follow their recent pattern and quickly rebound?

It’s nearly impossible to know where rates will go in the next few weeks or months. But not acting on a rate dip can lead to regrets — and a higher monthly payment.

Here’s how much you could save if you buy when rates are low, rather than taking out a mortgage once they’ve jumped again.

The mortgage rate head fake of fall 2024

In September 2024, 30-year mortgage rates fell all the way to 6.2 percent, the low-water mark in recent years. The impetus was a looming rate cut by the Federal Reserve. While the Fed did go on to cut its benchmark rate three times, mortgage rates moved in the opposite direction. The average 30-year mortgage rate had bounced to 7 percent by November 2024.

The average rate for a borrower who applied for a 30-year loan on Sept. 25, 2024 was 6.24 percent, according to Bankrate’s daily mortgage rate survey. But just two weeks later, rates had leapt to 6.52 percent.

Here’s how the two scenarios play out on a $400,000 loan:

That’s a difference of $68 per month, or $816 per year.

There was an even bigger penalty if you waited until early November 2024, when rates were up to 7 percent. On a $400,000 loan, that means a $2,661 monthly payment, or $201 more than the monthly payment for the same loan just five weeks earlier.

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The inflation frustration of April 2024

In March 2024, everyone was hoping that inflation was finally under control, and that the Fed would reverse its aggressive rate hikes of 2022 and 2023. Instead, inflation remained above 3 percent, and the Fed held firm.

As of March 27, 2024, the average rate on a 30-year loan was 7.01 percent. By April 17, after the previous month’s inflation number increased to 3.5 percent, rates rose to 7.33 percent. Here’s how those two situations affect the same $400,000 mortgage:

That’s a difference of $102 per month, or $1,224 per year.

Volatile rates contribute to a difficult housing market

Quickly moving rates are just one factor that has slowed the housing market recently. Borrowers were already unhappy with the state of rates. Four in 10 Americans say mortgage rates would need to drop below 6 percent for them to be comfortable buying a home this year, according to Bankrate’s 2025 Mortgage Rates Sentiment Survey.

High home prices pose another challenge for buyers. While price appreciation is cooling nationally, July marked the 25th month in a row of year-over-year price increases, according to the National Association of Realtors.

Hoping to buy? Get prepared

You shouldn’t try to time mortgage rates. They’re notoriously difficult to predict, even for experts. But if you’re in the market for a home — or a refinance — it pays to be ready to strike when rates are lower. You can do this by:

• Getting your finances and documents in order: That means checking your credit and taking steps to improve it if necessary, building your savings and, if you’re able, paying down existing debt. It also helps to start collecting the documentation you’ll need to apply, such as recent paystubs, tax returns and bank and retirement account statements.

• Choosing a lender with a generous preapproval window and rate-lock policy: If you’re a serious buyer, it’s always a good idea to get preapproved, a process by which a lender reviews your finances and decides how much it might be willing to lend you. And with a preapproval, many lenders give you the option to lock your rate at current levels. But preapprovals and rate locks do expire — often after around 30-60 days if you haven’t found a home and officially applied for a mortgage. Some lenders offer longer periods or let you renew. The longer your lender extends your preapproval and rate lock, the more flexibility you have to pounce on a good rate even if you haven’t yet found a home.

Recent history shows that if you jump in when rates have dipped a quarter-point or more over a few weeks, you’re probably making the right call.