Low interest rates have been igniting homebuyers for the past two years. This frenzy also achieved what we had thought was unachievable—buyers buying a home, sight unseen. Mortgage rates are creeping up, but interest rates are still interesting, and buying a new home in 2022 remains a good idea.
I’ve heard some buyers question whether they should buy right now. Rising mortgage interest rates is nothing to fear. From a historical standpoint, a 5% mortgage rate is still remarkably low. And a mortgage today with a fixed rate for the next 30 years is still considerably less expensive than historical comparisons.
Check the history. Let’s put the current number in perspective. We haven’t seen an annual average mortgage rate of 5% on a 30-year mortgage since 2009. At the start of the Great Recession in 2006, the average mortgage rate was 6.41%. Ten years earlier in 1996, the average mortgage rate was 7.81%, and 10 years earlier than that in 1986, the average mortgage rate was 10.19%.
Consider inflation. Currently, inflation has risen to 7.9%, the highest jump the country has experienced since the 1980s. Freddie Mac reported in February 2022 that, “In 2021, the median sales price for all houses sold in the United States reached $400,000 for the first time ever, up nearly $70,000 dollars from 2020.”
According to Forbes.com, real estate is a good investment that will protect your money’s value.
“As inflation rises, the cost of everything goes up, including real estate. However, if you can lock in a low-interest, fixed-rate mortgage, then the cost of your home—an appreciating asset—will stay the same as the value of your property rises.”
Take the tax deduction. Then, factor in the additional savings you gain from the tax incentive of mortgage interest deduction for homeowners. This itemized deduction allows homeowners to count interest they pay on a loan related to building, purchasing, or improving their primary home against their taxable income, lowering the amount of taxes they owe. So, with mortgage rates beating inflation and mortgage interest being tax deductible, the money being borrowed is practically FREE.
Interest rates remaining near historic lows bodes well for buyers. Today’s market reflects some of the least expensive debt a homebuyer will be able to attain in the market.