Does It Really Matter How Low Mortgage Rates Go?

Predictions are always interesting. Of course some are more interesting than others, depending on topic. Some are scientific (like predicting the winner of the Super Bowl), while others are made for fun (like the weather).

Mortgage guru Barry Habib made a fairly bold prediction recently. Based on some market indicators, he believes that 30-year mortgage rates might reach a new record low in 2020. That would mean interest rates would fall below 3.31%. There are even some predictions that see interest rates in the twos — but those seem to be more sensational than fact-based, as predictions can often be.

Sometimes it’s about the headline.

If you look at other headlines, home prices were 3.5% higher in April than they were a year earlier, according to the S&P CoreLogic Case-Shiller U.S National Home Price Index. And the median price of a home sold in May rose 3.6% from a year earlier, according to Redfin. It seems like falling mortgage rates are having the seemingly predictable effect of contributing to larger home price gains. That just means lower rates won’t help with the affordability issue keeping many potential homebuyers on the sidelines.

So, does it really matter how low mortgage rates go?

It seems like whatever happens with rates, no matter how low they go, home prices will rise — off-setting any benefit low rates might provide to potential homebuyers.

The best option right now for those considering buying may be to take the leap while rates are low and home prices have not increased much. Waiting could mean lower rates, but those lower rates will likely come with higher prices.

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