What homebuyers should do as mortgage rates rise again

Average mortgage interest rates are on the rise again. 

After declining comfortably into the 5% range in February, rates here rose last week, thanks to a combination of uneven unemployment and inflation reports and ongoing geopolitical uncertainty. And with the chances of an interest rate cut at this week’s Federal Reserve meeting less than 1% now, homebuyers may need to explore alternative options if they’re looking to secure an affordable interest rate.

Fortunately, there are still reliable ways to do just that. But they will require an aggressive, informed approach on behalf of homebuyers. A little timing and luck will be required, too, as interest rate rises here could become more common if existing market conditions don’t quickly improve. Against this backdrop, there are certain steps homebuyers should consider taking. Below, we’ll detail three of the more important ones.

Start by seeing how low your current mortgage interest rate options are here.

What homebuyers should do as mortgage rates rise again

Don’t sit on the sidelines as mortgage rates slowly tick up again. Instead, consider making these three moves right now:

Shop around for rates and lenders

Shopping around for mortgage interest rates and lenders has proven to be one of the best and most effective ways to locate a below-average interest rate. Buyers have been able to find a mortgage interest rate as much as a full percentage point below average by taking the time to review their options. So don’t discount this tactic, especially now, as lenders will respond in different ways to market conditions. 

In other words, don’t automatically assume that rates will be the same from lender to lender, as there is plenty of room for interpretation in today’s economy. You won’t know which cheaper offers are truly out there, however, until you take the time to do your research. Fortunately, with online marketplaces listing rates, lenders, fees and terms all in one location, it’s arguably easier than ever to complete this critical part of the homebuying process.

Shop for mortgage rates and lenders here now.

Consider all the ways to secure a below-average rate

Once you’ve determined which lender is actually offering the most affordable options, you can feel comfortable moving forward. And that will involve reviewing all of the ways in which you can secure a below-average rate now. Adjustable-rate mortgages (ARMs) may be worth evaluating, for example, especially if you’re comfortable with changes in the future in exchange for a potentially lower rate right now. 

The addition of mortgage interest points may also be helpful, especially if the fee you pay the lender now results in a materially lower rate (enough to justify a purchase). Finally, consider the pros and cons of a 20-year mortgage term, too, which isn’t always listed on lender websites but can still provide an attractive combination of an abbreviated term and slightly lower mortgage rate.

Lock in a rate before they have a chance to increase again

Just 5.87% and 5.37%. Those were the average mortgage purchase interest rates for 30-year and 15-year terms on February 11, barely one month ago. By March 16, however, they had climbed to 6.12% and 5.62%, respectively. Those are considerable increases, especially considering the absence of a Fed meeting during this time period. 

Against this backdrop, then, and with the potential for rates to increase further, a rate lock could be the smart move to make right now. Buyers may be able to float it down before closing – or refinance after they’ve bought the home – but today’s rates may not last much longer. Remember, too, that even an interest rate pause from the Fed could cause rates to rise as lenders protect against market uncertainty. Locking in a rate currently, however, will offset that increasingly likely scenario.

The bottom line

With mortgage rates rising again and no clear insight into when the rise may stop, let alone reverse course, homebuyers will need to be strategic in their approach. That means more aggressively shopping around for rates and lenders, exploring all of the available ways to secure a below-average rate, and perhaps, most importantly, locking in a rate before they have a chance to increase again. Consider, too, speaking with lenders directly, as they may be able to help you better navigate this period in the homebuying market and detail alternative options you may not have previously considered.