There has been a lot of talk about interest rates over the past few months. Unfortunately, most of the conversation has not presented a full and complete picture. As a result, some buyers and sellers are opting to wait for rates to "cool off" or come down before they buy or sell. This is largely due to the historic low rates of a few years ago. However, interest rates are connected to inflation and the overall strength or lack thereof of the economy. Which means that rates will fluctuate.
Historically, between 1971 and 2023 the average rate for a 30 year fixed mortgage is 7.74%. Rates reached their highest peak in October of 1981 at 18.63% and saw their lowest point in January of 2021 at 2.65%. The problem is that people are looking at 2021 as though it was normative, when there was nothing normal about that year or those rates.
Three things to know about interest rates and the current market. We are currently in a "normal" real estate market. It is not wise to compare this year to any of the previous years. 2021 is often referred to as the unicorn year. It is doubtful that we will see those rates again in our lifetime. Oddly enough, no one compares this year to 1981. Why not?
The second thing is that interest rates are fluid. Although your monthly rate is fixed, rates in general will change over the lifetime you are repaying your mortgage. When rates rise, you should rejoice. When raises fall you should refinance.
The third and final thing is to remember that you are not paying a monthly interest rate, you are paying a dollar amount. Whether the rate is 2% or 22%, the only thing that matters is what are the dollars and cents you are required to pay?