Mortgage interest rates have risen to around 6.5% this spring after briefly dipping below 6%, creating fresh challenges for home buyers and sellers.
The increase is primarily attributed to the start of the war in Iran, which analysts say has pushed rates back up just as the traditionally busy home-buying season is in full swing..
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Stephen Kates, a financial analyst with Bankrate, said rates are unlikely to drop significantly in the near term.
“We’re probably not going to be back under the 6s for a little while,” Kates said.
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For context, home-buyer Laura recalled locking in a rate well below today’s levels when she purchased her home.
“At that time it was 5%. And by the time we closed on the house, it had gone down to 4.75%,” Laura said.
Kates said that range represents the historic sweet spot for mortgage interest rates — one that is unlikely to return soon.
Following the COVID-19 pandemic, rates dropped as low as 2% to 3%, allowing buyers to more affordably purchase larger, more expensive homes. Now, those same homeowners are staying put because current rates are roughly double the rate they locked in. This is reducing the number of existing homes coming onto the market. That low inventory is driving up asking prices for the homes that are available.
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For those who want to buy, new construction may offer more options than the existing home market. New homes are being built across the Tulsa area, particularly in south Tulsa, Bixby and Broken Arrow.
Both Kates and Laura offered straightforward advice for prospective buyers.
“Don’t buy more house than you need,” Laura said.
“The best time to buy is when you can afford it. If you can cover the down payment, if you can cover the mortgage sustainably,” Kates said.
Kates also cautioned buyers against stretching their budgets with the expectation that rates will fall and allow them to refinance.
“I would highly discourage anybody from buying a home that they may or may not be able to afford with the hope that they can refinance it in 6, 12, 18 months,” Kates said.
He said there is too much uncertainty about whether lower rates will materialize on that timeline.
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