Homebuyers have better than expected lower rates this Spring. For the first of the year many potential homebuyers called it quits with rising house prices, low inventory and mortgage rates above 5%.

“It was somewhat of a surprise to see the degree and intensity of the pullback,” said Robert Dietz, chief economist of the National Association of Home Builders. “Five percent at those pricing levels was enough to take the wind out of sails of the housing market.”

The current 4.5% rate is predicted to not rise much for the remainder of the year which means several positive outcomes for the homebuying market.

To begin, there will be more buying power. Lower mortgage rates along with rising wages gives homebuyers more leverage in the current residential real estate market. Current 4.5% rates make a $200,000 30 year-fixed mortgage $71 cheaper than at 5% which means total interest savings over the life on the loan would total $21,699.

“While folks might not have hit the bottom of the rate cycle – no one can perfectly time markets – on the historic side, these are still very attractive rates,” said John Pataky, executive vice president, chief consumer and banking executive at TIAA Bank.

Sellers will want to take the gains and run. According to evidence move-up buyers are purchasing more. The average mortgage balance for purchases has reached record levels. This is also good news for homebuyers in the lower priced home market. The move-up buyers will open up inventory in lower priced homes.

“It’s a musical chairs game,said Mike Fratantoni, chief economist of the Mortgage Bankers Association. “You need someone in the higher end to move, and it works its way down the ladder, eventually opening up an entry-level home.”

Potential homebuyers cannot control the Fed or rising home prices but there are several factors they can control when it comes to determining the interest rate they will get on a mortgage. Homebuyers can reduce their rate by the amount of money they put down. The larger a down payment the lower the rate giving the homebuyer more risk than the lender. The higher your credit rating the better the rates. For example a person with a high credit score (760 – 850) would get a 4% rate while a person with a credit score of 660 to 679 would receive a 4.5% rate on a $216,000 price with a 30-year fixed-rate mortgage.

“While folks might not have hit the bottom of the rate cycle – no one can perfectly time markets – on the historic side, these are still very attractive rates,” said John Pataky, executive vice president, chief consumer and banking executive at TIAA Bank.

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