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Mortgage rates have been high in recent years, reaching Its highest level since 2000 in August 2023Thanks to a combination of the pandemic, inflation, and the Federal Reserve’s efforts to rein in spending, interest rates on all credit products rose. And mortgage rates were no exception. But as the pandemic inflation Although the interest rate has cooled steadily from a decade high in June 2022, anticipation around a federal funds rate cut has grown. And while the Fed does not directly dictate what rates lenders offer borrowers, an interest rate cut will certainly impact what homebuyers and homeowners looking for refinance spend on their loans.
Against this backdrop, it’s critical that both groups carefully consider their mortgage rate options before taking action. And they should do their due diligence to avoid some simple but easy mistakes to make in July in particular, as speculation about interest rate cuts mounts. To that end, below we’ll break down three timely mortgage rate mistakes to avoid this month.
Start by seeing what mortgage rate you qualify for here now.
3 Mortgage Rate Mistakes to Avoid This July
While it’s critical to know what approaches to take when purchasing a home (or refinancing an existing mortgage), it’s equally important to know what mistakes to avoid. This July, those mistakes include:
Not monitoring the rate climate
The next inflation report will be released by the Bureau of Labor Statistics on July 11, and the next Federal Reserve meeting to discuss interest rates begins on July 31. Both have the power to change interest rates, perhaps dramatically. A falling inflation rate could prompt lenders to begin offering lower rates in anticipation of a looming formal rate cut, and that formality could occur at the end of the Fed’s two-day meeting. But if the overall rate mood is not monitored, particularly in the United States, the Fed will likely be forced to cut interest rates in the coming months. These dates and the dates that surround themyou may miss out on lower fare offers.
Learn more about where mortgage rates could be headed online today.
Fixing a fixed rate
A fixed interest rate is often a smart way to protect against future rate increases and, with them, additional costs. But in the current interest rate climate, where multiple interest rate cuts could occur, it is arguably a mistake for some borrowers to stick with a fixed rate.
Instead, a adjustable rate mortgage (ARM) It may be preferable. This type of mortgage will adjust over time and that adjustment could provide a lower rate in the short term compared to having to complete a traditional mortgage refinance to secure that better rate if you had a fixed-rate mortgage loan. An adjustable-rate mortgage isn’t for everyone and comes with inherent risks, but it would be a mistake not to look into it now, especially now that interest rate cuts seem more likely.
Don’t compare lenders
It’s always a mistake not to compare different lenders, particularly for products like mortgages, when there are hundreds of thousands of dollars at stake. But it’s a particularly critical mistake to avoid in the changing rate climate of July 2024. By comparing different lenders, you can potentially save money. half a percentage point either furtherThis will translate into significant savings, both on your monthly payment and over the life of your loan. But you won’t be able to realize those savings without shopping around to find a lender with the lowest rates and best terms. And remember: You don’t necessarily have to refinance with the same lender you bought your home with.
Start searching for lenders and rates here now.
The bottom line
With the prospect of a lower interest rate environment, both homebuyers and current homeowners looking to refinance their mortgages should take a judicious and nuanced approach to the mortgage rate environment, including avoiding simple but costly mistakes. This includes failing to monitor the evolving interest rate environment for new lower interest rate opportunities, locking in a fixed rate instead of a mortgage with a potentially lower adjustable rate, and failing to shop around for the lowest interest rate and most competitive terms. By avoiding these mistakes now, homebuyers and homeowners will improve their chances of mortgage rate success, both in July and in the months ahead.
