Barbara Corcoran Says Rising Mortgage Rates Have This Silver Lining
- Many of today's home buyers are struggling with higher mortgage rates.
- While buying a home may be more expensive right now, in time, that could change.
It pays to look at the bright side.
Back in mid-2020, mortgage rates did something amazing for borrowers -- they started plunging to record lows. Borrowing rates then remained competitive all the way through the beginning of 2022.
But over the past seven months, mortgage rates have been rising sharply. And now, those looking to buy a home face a distinct challenge -- having to pay more to finance a home purchase at a time when property values are through the roof.
If you're trying to buy a home, you may not be happy at all with how mortgage rates are trending. But Shark Tank personality and real estate guru Barbara Corcoran says that higher mortgage rates aren't all bad. That's because they have the potential to drive the price of homes downward.
A much-needed cooling of the real estate market
When it comes to borrowing money for any purpose, whether it's to buy a home, a car, or furniture, it's natural to want to pay as little interest as possible. So if you're looking to sign a mortgage, you may be less than thrilled with today's rates.
But Corcoran says that while nobody likes higher interest rates, they could help cool the housing market. How so? If buyers start to pull out of the market due to rising rates, it will lead to less competition. That should result in fewer bidding wars, which are notorious for driving home prices upward.
Plus, if mortgage rates keep rising, it might spook sellers into listing their homes before borrowing truly becomes unaffordable. And if lots of properties flood the market in short order, it will lead to more competition and a narrower gap between housing supply and buyer demand. The likely result? Lower home prices, which can help offset higher borrowing costs.
Eking out savings
While it may be considerably more expensive to take out a mortgage today than it was at this time last year, there are still steps buyers can take to reap some savings. For one thing, those who come in with high credit scores may enjoy a fair amount of interest rate savings. Those whose scores need work can try to improve them, whether by correcting credit report errors, paying all incoming bills on time, or eliminating outstanding credit card debt.
Borrowers should also make sure to shop around with different mortgage lenders. Although rates may be higher across the board, that doesn't mean some lenders aren't more competitive than others.
Facing reality while being hopeful
Today's home buyers would no doubt prefer that mortgage rates mimic the levels they sat at from mid-2020 through the start of 2022. But at this point, buyers should expect borrowing rates to largely stay at their current level or rise further.
This isn't to say that mortgage rates won't dip here and there. But the days of signing a 30-year mortgage at 3% may be long behind us. Rather than bemoan that fact, buyers can hope that it leads to a much-needed cooling of the housing market -- and more affordable purchasing opportunities in the future.
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