What history tells us about today’s interest rates

by Patrick Regan

Keeping things in historical perspective can be tough when mortgage rates have roughly doubled in the last year. Any rate in the sixes, though, is right in the range of what buyers got during most of the 1990s and 2000s.

Mike Del Preto, a senior mortgage advisor at Fairway Independent Mortgage Corporation in Chicago, noted there are tools to find interest rate solutions for most buyers. He said one popular option is the temporary rate buydown, allowing buyers to pay a fee and drop their interest rate for one or two years.

After those years are done, the homeowner’s rate will return to today’s full percentage, or they can refinance if rates have dropped. As many lenders have noted in recent months, rate buydowns allow buyers to “marry the house and date the rate.”

Del Preto also said there can be a cost to sitting out of the market and waiting for rates to change. He cited a cost-of-waiting analysis that showed waiting to buy a property for one, two or three years can cost the buyer the value of home appreciation, offsetting any savings from a lower interest rate. Depending on the property appreciation, waiting can cost a homebuyer tens of thousands of dollars in the long run.

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