Should You Wait for Interest Rates to Come Down?

The question of whether interest rates are still on the rise is a valid concern for anyone considering purchasing a home. As of the second quarter of 2023, we have witnessed a significant uptick in interest rates compared to the historically low levels they reached a couple of years ago. However, predicting the future trajectory of interest rates isn't an exact science, as it involves numerous factors including economic conditions, inflation rates, and the monetary policies of central banks such as the Federal Reserve in the United States.

So, should you wait to buy a home until interest rates come down? The answer isn't as straightforward as it might seem. While higher interest rates mean higher mortgage payments, waiting for rates to come down can also present risks.

One risk is that home prices could continue to rise, which has been the trend in many markets. In this scenario, even if you were able to secure a mortgage at a lower interest rate in the future, the increase in home prices might offset any savings from lower interest rates. Moreover, the supply of homes on the market might be less when you decide to buy in the future, reducing your options.

Also, there's the potential cost of delaying homeownership. Every month you wait is a month you're not building equity in a home. And if you're currently renting, it's a month of paying rent without contributing to your own long-term investment.

It's also worth noting that while current interest rates are higher than they were at their historical lows, they are still relatively low from a historical perspective. So, even though you might not be getting the rock-bottom rates of a few years ago, you're still getting a relatively good deal by historical standards.

Therefore, while it might be tempting to wait and see if interest rates fall, it's essential to consider other factors like home prices, the supply of available homes, and your own personal and financial circumstances. For most, buying a home is about more than just the numbers—it's about finding a place to live and grow.

Ultimately, the question of whether to wait to buy a home until interest rates come down is a complex one that depends on a range of factors.