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Ways to fight the cost of rising mortgage rates

A return to those historic lows in the 3% range is unlikely, but there are other ways for homebuyers to keep costs in check.

BOISE, Idaho — After several years at historic lows, mortgage rates have risen big-time, and are too high for many people to buy a home right now. But if you’re looking to buy, there are things you can do to make it more affordable.

A couple weeks ago on Growing Idaho, we heard about how those higher rates were slowing down home sales by more than 33 percent in our area. Bottom line, plenty of folks are waiting to buy a home until those rates come down.

How low will those rates go? It depends on who you ask. Forbes aggregated the average mortgage rate forecasts for next year on a 30-year fixed-rate loan:

  • Current average: 6.5%
  • Realtor.com: 7.4%
  • Fannie Mae: 6.8%
  • Freddie Mac: 6.4%
  • Goldman Sachs: 6.2%
  • Mortgage Bankers Assoc.: 5.2%

Right now, we're at about 6.5 percent. We used the Mortgage Bankers Association forecast recently, which has the rates settling in the low 5’s. But as you can see, that's the low forecast, with Fannie Mae expecting rates to go up into the high 6's and Realtor.com shooting the moon, expecting well over 7.

All this comes after rates were in the low 3's just a year ago. When are we going to get back to those? That’s hard to say, but maybe never.

"I don't think that's going to happen in my own personal opinion,” said Katrina Wehr, the 2023 President-Elect of Idaho REALTORS®. “That was a result of a really, really bad market and trying to correct it."

So, if mortgage rates are only going to drop, at most, a percentage point, and could even go up a point, what can homebuyers do if those rates aren't going to work for them? You can actually drive down your rate yourself, in a way. That’s really a figure of speech. The rate will stay the same, but you can cut your costs to buy a home in other ways.

  • If you can make a down payment of at least 20 percent, you won't have to buy mortgage insurance. That’s mortgage insurance for the lender, not homeowner's insurance for you. You'll still need homeowner’s insurance.
  • Also, the Idaho First-Time Home Buyer Savings Account can help you save for that hefty 20 percent down payment. This program allows you to save up to $15,000 per year, twice that if you're married, up to $100,000 total, all of which could be deducted from your state income taxes.
  • You can also have the home seller cover more of the closing costs, which is normally in the thousands of dollars, and have your REALTOR® negotiate other seller concessions, like paying for repairs.

"So if you're saving money and able to put down a little more money and pay the closing costs, and then use a REALTOR® to negotiate some seller concessions, and work on your behalf, then you'll be fine,” said Wehr. “In the event that I'm wrong and rates drop to four or three, refinance. It'll be even better."

Refinancing is one of the reasons some people have kept buying homes and prices have continued to go up. Folks know that if the mortgage rates do drop again, they can refinance to that lower rate.

And to keep things in perspective, mortgage rates back in 1981 averaged around 18 percent, which is almost triple what rates are at right now.

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