4 thoughts on "marry the house, date the rate"

As mortgage rates began to surge in 2022, many homebuyers made their purchases with the belief that mortgage rates would quickly decrease, enabling them to refinance promptly. However, the opposite has occurred, and today, the average 30-year fixed mortgage rate has reached a 23-year high of 8.03%.

The persistent consumer expectation that mortgage rates will soon plummet down to a 5-handle or even a 4-handle continues to be a part of the 2023 consumer psychology. Sometimes, it isn’t even industry professionals pushing it.

“As an LO it puts me in a tricky position because clients have said ‘well I heard rates will be dropping so can't I just refi’ and my response has been.... maybe, but let's not count on it,” Jeremy Bare, a loan officer in the South Coast of Massachusetts, tells ResiClub.

I have a few thoughts on “marry the house, date the rate” thinking.

1. No one can predict mortgage rates with 100% certainty. There’s no shortage of forecast models for both house prices and mortgage rates, and there’s also no shortage of forecast models getting it wrong. Past outcomes do not guarantee future events, and uncertainty is a constant factor when it comes to mortgage rates and house prices. The past three years have only served to underscore this reality.

2. While it's true that 2022 homebuyers haven't experienced the refinance relief they hoped for, it's also a fact that almost all of those 2022 borrowers secured lower rates compared to today's market rate. In other words, consumers may find themselves committed to their current rates for a longer duration than they initially expected. However, this situation might still be advantageous, considering they might have been stuck with a higher rate if they had waited longer.

3. Let’s talk about consumer psychology. Is it possible that financial and real estate organizations, such as the Mortgage Bankers Association, which were adamant that mortgage rates would fall back under 6%, inadvertently contributed to suppressing activity over the past two years? If both sellers and buyers had possessed the knowledge they do now (i.e., that mortgages would reach 8% in 2023), would more individuals have been inclined to take action last year while rates were sharply rising towards 6%?

4. Home prices usually go up—but not always. Last summer, Redfin CEO Glenn Kelman told me that his “parents believed that it was literally inconceivable for [home] prices to go down.” That “religion” people “had from 1946 to 2008” is why so many were shocked, he said, when in 2008 house prices ultimately crashed, their homes went underwater, and they lost eligibility to refi. (Note: Refi eligibility varies by loan type/lender).

Big picture: When committing to a monthly loan payment, borrowers might want to consider and be prepared for the possibility that they will be making that payment for the entire loan duration. If they do manage to refinance in the future, it will be a welcomed financial benefit.

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