Broker's advice as mortgage rates top 7%

Plenty of hopeful homebuyers are alarmed by a recent jump in rates past the 7% mark – and now is the time for cool heads

Broker's advice as mortgage rates top 7%

Mortgage rates have blown past the 7% mark again, hitting an eight-month high and consigning the brief rate drop seen during the fall to distant memory.

The 30-year average fixed mortgage rate jumped to 7.09% in the week ending January 10, according to the Mortgage Bankers Association (MBA), a 10-basis-point climb that illustrates the continuing affordability challenges gripping many hopeful buyers across the country.

While rates are generally expected to tick lower as the year progresses, plenty of prospective mortgage borrowers are “scared” in the current climate – and that means mortgage brokers have a responsibility to guide rather than merely sell, according to Anchor Home Loans advisor David Kakish (pictured top).

He told Mortgage Professional America that the “consummate professionals” in the industry were prioritizing a guidance-focused approach over transactional relationships built around bumping up their sales. “There’s a big difference between the two,” he explained.

“When you’re selling high rates, you tend to try to put a spin on it. Spinning is saying something like, ‘Well, historically rates aren’t that high. Look at the 1980s – the average mortgage rate was higher.’ But in doing so, you’re hiding the fact that obviously the price of real estate has gone up exponentially over the course of the same amount of time that you’re showing the average rate on.”

Date the rate, marry the home? Not so fast

A common saying tends to get thrown around in the real estate world when mortgage rates begin to increase: “Date the rate but marry the home.” That’s a term Kakish said he steers clear of, one that fails to account for the fact that every homebuyer’s circumstances are unique.

For instance, homeowners eyeing up a move to a smaller property may want to hold off until rates tick lower. “If you’re downsizing, the recent uptick in rates coupled with pricing where it is doesn’t really serve you right now,” he explained. “The reason is that if you have an $800,000 house, but because of the recent rate hikes you’re going to see 5% less on the value of your house, that’s $40,000.

“But if you want to buy a $400,000 house, a 5% decrease in that pricing is $20,000 – meaning you lost an extra $20,000. So it may be worth it to wait until spring.”

On the other hand, now may well be an opportune moment for move-up buyers to push ahead with a home purchase. Rates may currently be high, but waiting for borrowing costs to drop could also mean those buyers have to contend with much more competition and bidding wars when rates do eventually fall.

Even for those buyers, now might not be the right time to move – and it’s important to have conversations centred around whether they can capture enough value by purchasing now instead of waiting, Kakish said, to help them weigh up that decision.

Are mortgage rates guaranteed to tick much lower in 2025?

There can also be a temptation for buyers to purchase now with the belief that they’ll be able to refinance when rates slide in the months ahead – but a protracted dip in mortgage rates is by no means a surefire thing, with bond yields climbing across the globe in recent weeks and the Federal Reserve also scaling back its own plans for 2025 rate cuts since the end of last year.

“I don’t think our economy is stable. I’m not telling anyone, ‘Hey, in six months, in nine months, rates will be here,’” he said. “We don’t know, so we want to make sure to help them work the calculation: If this is what it is forever, can you afford this as it is?”

That’s doubly important, Kakish added, with plenty of projections about where the economy and mortgage rates were headed in 2024 having ultimately been proven wrong. “We don’t want to offer [clients] a prospective future bait and switch,” he said. “We want to help them through it. The reality is, they will be able to refi – but as for when that is, we can’t say. So we want to make sure they can afford it.”

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