Homebuyers Hesitant To Purchase Due To High Mortgage Rates

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Homebuyers Hesitant To Purchase Due To High Mortgage Rates

Apr 26, 2023 | News | 0 comments

Given the exorbitant cost of housing, present-day home purchasers are extremely responsive to mortgage rates, and they have identified their threshold.

As a result of the government’s intervention for several years following the aftermath of the great recession and the initial phases of the Covid-19 outbreak, which kept mortgage rates artificially low, modern homebuyers possess a distorted perception of what constitutes “typical” mortgage rates.

A survey conducted by John Burns Research and Consulting in March revealed that 71% of prospective homebuyers are unwilling to consider a 30-year fixed mortgage rate surpassing 5.5%. Meanwhile, the current rate hovers around 6.4%.

Moreover, 62% of buyers expressed their belief that a mortgage rate considered “historically normal” is less than 5.5%. However, according to Freddie Mac, the average mortgage rate since 1971 has been 7.75%.

For the majority of buyers, the mortgage rate dictates their affordability since they are primarily concerned with their monthly payments rather than the actual home price. Therefore, the rate plays a critical role in determining the monthly payment.

Given the high number of prospective buyers who insist on securing a rate lower than 5.5%, they might have to delay their purchase plans for a considerable period. Mortgage rates have hovered above 6% for almost a year, and industry experts do not anticipate a substantial decrease in rates this year.

The results of an April survey by U.S. News and World Report support these conclusions, with 66% of Americans intending to purchase a home this year stating that they will wait until rates decrease.

Moreover, the U.S. News survey revealed that a quarter of homebuyers anticipating lower rates expect them to fall below 5%. Additionally, nearly two-thirds of the participants reported reducing their housing budgets due to the current mortgage rate levels.

Although some buyers are unable to afford the home of their choice at current rates, others are choosing not to buy due to their aversion to the idea of a higher rate, even if it’s within their means. Furthermore, the John Burns report suggests that older consumers are not necessarily more inclined to accept higher rates solely based on their previous experiences.