Yes, 7% is Actually a Good Interest Rate for Home Buyers

Mortgage interest rates of seven percent! That seems high, doesn’t it? Interest rates are the highest they’ve been in years currently as the Federal Reserve works to curb inflation. It’s giving a lot of people sticker shock—7% interest makes buying a home now feel more like a bad idea to many prospective home buyers in Houston. It’s a shame, too, because 7% is actually a good interest rate for home buyers!

True, in the recent past, securing a mortgage with a 7% interest rate might have seemed like a steep ask. However, as Houston’s real estate industry experts at Angel Fultz Realty, we’re here to inform you that 7% is not only normal, but could also be an advantageous choice for you in the current economy. Let’s delve into why:

The Market Landscape

The first thing to remember is that interest rates fluctuate depending on the economy. Since peaking at a whopping 18.45% back in October 1981 (the good old days!), mortgage rates have softened, but dipping below 6% has not been the norm. The 30-year fixed mortgage rate has gone through multiple ups and downs in the past 50-plus years. Today’s rates are not far from where rates were when Freddie Mac first began tracking them in 1971. 

The Inflation Component

In 2013, the Fed announced that it would no longer be buying as many bonds. This caused the bond market to drop. As a result, the yields on mortgage bonds increased to attract buyers, causing mortgage rates to rise. By the start of 2014, rates were at 4.53%. However, they then began to decline, falling to 3.59% by February 2015. After the 2016 presidential election, long-term rates began to rise again.

The U.S Federal Reserve uses interest rates, among other tools, to fight inflation. By raising the short-term interest rates, borrowing becomes more expensive, which in turn slows down the growth of the economy and reduces inflation. With the current inflation rates, a 7% mortgage interest rate is a realistic possibility within the foreseeable future. Another dip to 3% may not be seen again in our lifetime!

Why 7% is Still a Good Interest Rate for Home Buyers

By now, you might be thinking, “But isn’t it better to get the lowest possible rate?” While it’s certainly beneficial to secure a lower rate when possible, a rate of 7% can still be a good mortgage interest rate for several reasons:

1. Better Purchasing Power: The real estate market in Houston is competitive, with home prices continuing to rise. Waiting for lower mortgage rates could mean paying more for the same house later due to an increase in home values.
2. Tax Benefits: Remember that mortgage interest can be tax-deductible. Higher interest can lead to greater tax savings.
3. Building Equity: Even with a 7% interest rate, each payment you make is going towards owning a larger part of your home.

As a prospective home buyer in Houston, it’s important to consider all factors, including your personal financial standing, interest rates, and the overall state of the housing market. Mortgage rates are just one piece of the puzzle.

At Angel Fultz Realty, we provide expert guidance and first-rate services that demystify the home buying process and make it as stress-free as possible. To learn more about how we can help you navigate the Houston real estate market, contact us today!

Our team of experienced, driven, and empathetic REALTORS® are eager to help you turn your dream of homeownership into reality, even in the face of a potentially rising interest rate environment. Never forget, the best time to buy a home is when you’re ready, regardless of where mortgage rates might stand. Trust in your journey, and let us be the guiding star that leads you to your home sweet home.