Why Sky-High Mortgage Rates Shouldn't Get You Down

Rates won't stay this way forever.

At this time last year, it was possible to sign a 30-year mortgage for under 3% -- especially if you had strong credit. But those days are unfortunately long gone.

Now, if you want a 30-year mortgage, you're looking at somewhere in the ballpark of 7% as your interest rate. And that's a bummer, to say the least -- especially given how high home prices are today.

But while sky-high mortgage rates may be enough to push you out of the housing market, you don't necessarily have to resign yourself to another year or more of renting. Here's why.

Mortgage rates change all the time

It's expensive to borrow in mortgage form right now. But in a year from now, rates might be lower. And they might end up much closer to 3% than 7% in a year after that.

Mortgage rates commonly rise and fall over time. And sometimes, it can be tricky to predict which direction they'll move in.

But in time, mortgage rates are apt to drop from the decades-high level they're at today. And once that happens, you can take a mortgage with a higher interest rate attached to it and replace it with a home loan with a lower rate by refinancing.

In fact, many homeowners refinanced their mortgages in 2020 and 2021, when rates were way down. And that wasn't so long ago. If you sign a mortgage today, it's conceivable that come 2024, you might end up in a good position to refinance that loan and lower your monthly housing payments.

Higher mortgage rates aren't forever

Today's mortgage rates aren't the highest they've ever been -- not even close. But they are the highest rates borrowers have seen in several decades. And that can be demoralizing and downright annoying when you're trying to buy a home.

But remember, the mortgage rate you start out with isn't necessarily the one you'll be stuck with for life. And if you make a point to keep your credit score in good shape, you may find that refinancing is a fairly easy thing to do once mortgage rates start to dip downward.

Many of the borrowers who locked in ultra-low mortgages in 2020 and 2021 were able to snag those competitive rates due to having outstanding credit. So it pays to consistently keep tabs on your credit report, pay bills on time, and take other such steps that can lend to better credit. That way, you'll be able to pounce when rates finally drop.

The frustrating thing is that we can't say with certainty when that will happen. After all, in 2021, experts thought mortgage rates would rise modestly in 2022. No one was predicting that rates would get close to 7% this year -- yet here we are.

But based on historical data, mortgage rates are likely to keep rising and falling. And if you make a point to track them, you'll put yourself in a strong position to jump on a refinance opportunity once going that route makes sense.