30-year mortgage rates are hovering around 6%, near 3-year lows. The Fed is expected to cut rates again, and many buyers are asking: "Should I buy now or wait for rates to drop further?" The answer isn't simple. Rising home prices, the lock-in effect, and your personal timeline all factor in. Let's run the numbers.
Buy Now vs. Wait Calculator
Current Market Snapshot: December 2025
Here's where we stand in the mortgage market right now:
30-Year Fixed Rate
Median Home Price
Supply Constraint
Historical Perspective: Is 6% Actually High?
Before deciding if you should wait for lower rates, let's put 6% in historical context:
Mortgage Rate History: 50-Year View
Perspective Check: The 50-year average mortgage rate is approximately 7.7%. At 6%, you're below the historical average. The 2.9% rates of 2021 were the lowest in American history, driven by emergency Fed policy during COVID-19.
The Math: Buy Now at 6% vs. Wait for 5.5%
Let's run detailed scenarios on a typical $415,000 home purchase:
Buy Now @ 6%
Wait 6 Months @ 5.5%
Wait 12 Months @ 5%
The Verdict
- Wait 6 months for 5.5%: Save $67/month ($24,120 over 30 years), but need $1,660 more down payment and home costs $8,300 more
- Wait 12 months for 5%: Save $137/month ($49,320 over 30 years), but need $3,320 more down payment and home costs $16,600 more
- Best strategy: Buy now, refinance later if rates drop significantly
The Refinance Option: If you buy now at 6% and rates drop to 5% in 12 months, you can refinance. Typical refi costs are $4,000-8,000 but break even in 24-36 months with a 1% rate drop. This gives you the best of both worlds: secure the home now, lower the rate later.
The Lock-In Effect: Why Inventory Stays Low
Understanding the "lock-in effect" is crucial for today's buyers. Here's why prices remain elevated despite higher rates:
Who's Trapped by Their Mortgage Rate?
62% of homeowners have rates under 4%. They won't sell unless they absolutely have to, because moving means going from ~3.5% to ~6% - nearly doubling their rate.
What This Means for Buyers
- Limited supply: 30-40% fewer homes on market than pre-pandemic
- Price support: Low inventory keeps prices from falling significantly
- Waiting trap: Waiting for lower rates won't suddenly flood the market with homes
- When does it break? Only when rates drop to ~5% will meaningful inventory return
When to Buy Now vs. Wait: Decision Matrix
Fed Rate Outlook: What to Expect
The Federal Reserve's decisions directly impact mortgage rates. Here's the current outlook:
Fed Meeting This Week
Year-End Projection
Key Insight
Important: Mortgage rates don't directly follow the Fed rate. The 30-year mortgage tracks the 10-year Treasury more closely. Even with Fed cuts, mortgage rates can rise if inflation expectations increase or Treasury yields climb. Don't assume Fed cuts = lower mortgage rates.
The "Marry the House, Date the Rate" Strategy
This popular phrase captures a key insight: you can always refinance your rate, but you can't change which house you bought.
Refinance Break-Even Analysis
Rate Drop: 6% to 5.5%
Rate Drop: 6% to 5%
Rule of Thumb: Consider refinancing when you can lower your rate by at least 0.75-1% and plan to stay in the home for at least 2-3 more years. Many lenders offer no-cost refis that lower the break-even threshold.
Local Market Matters: Where Waiting Costs the Most
Not all markets are equal. In some areas, waiting is especially costly due to rapid appreciation:
Annual Home Price Appreciation by Market
High-Growth Markets: In Miami, waiting 12 months for a 0.5% rate drop while prices rise 8.2% costs you $34,000 on a $415K home. That's almost never worth waiting for.
Flat Markets: In NYC or SF where prices are rising slowly (1-2%), waiting 12 months for a 1% rate drop can save you significantly since price increases won't offset the rate savings.
Frequently Asked Questions
Should I buy a house now at 6% or wait for rates to drop?
It depends on your timeline and local market. If home prices are rising 4-5% annually, waiting 6-12 months for a 0.5% rate drop often costs more than you save. A $415K home appreciating 5% becomes $436K in 12 months, adding $21K to your purchase price. The math often favors buying now and refinancing later when rates drop.
Will mortgage rates go back to 3%?
Unlikely in the near term. The 3% rates of 2020-2021 were historic anomalies driven by emergency Fed policy during COVID. Most economists expect rates to settle between 5-6% long-term. Waiting for 3% rates could mean waiting 10+ years or forever, during which home prices will likely rise significantly.
Is 6% a good mortgage rate historically?
Yes, 6% is historically average to good. The 50-year average mortgage rate is approximately 7.7%. Rates were 8-10% throughout the 1990s and peaked at 18% in 1981. The 3-4% rates of 2020-2021 were the lowest in American history. At 6%, you're below the long-term average.
How much does a 1% rate difference affect my monthly payment?
On a $400,000 loan, each 1% rate change affects your monthly payment by approximately $230-250. At 6%, the payment is $2,398/month. At 5%, it's $2,147/month ($251 less). However, if waiting 6 months adds $20K to the home price due to appreciation, your new $420K loan at 5% costs $2,254/month, saving only $144.
What is the lock-in effect and why does it matter?
The lock-in effect refers to homeowners with ultra-low 3% mortgages from 2020-2021 who refuse to sell because they'd lose their rate. This has reduced housing inventory by an estimated 30-40%, keeping prices elevated despite high rates. Understanding this helps explain why prices haven't dropped despite rate increases.
When should I refinance after buying?
Consider refinancing when you can lower your rate by at least 0.75-1% and plan to stay in the home for at least 2-3 more years. Typical refinance costs are $4,000-8,000. With a 1% rate drop on a $332K loan, you'd save $207/month, breaking even in about 24 months. Many lenders offer no-cost refinance options that lower the break-even threshold.
Data Sources & References
This analysis is based on current market data from authoritative sources:
Mortgage Rate Sources:
- Freddie Mac Primary Mortgage Market Survey
- Mortgage News Daily Rate Index
- Bankrate Mortgage Rate Survey
Housing Market Data:
- National Association of Realtors - Research & Statistics
- Federal Reserve Economic Data - Median Home Price
- Zillow Research - Housing Market Reports
Fed Policy & Outlook:
All external links open in new tabs. Data current as of December 2025.
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