Mortgage Rates Hit Highest Level in Over a Year

Federal Reserve signals potential for future rate hikes

The Federal Reserve has stopped cutting rates and raised them in recent months, with potential for further increases in 2026 and 2027.

Analysts anticipate that the average 30-year fixed mortgage rate will reach the mid-seven percent range sometime in the coming year.

Strategies for lowering mortgage interest rates

Borrowers have 6 strategies available to lower mortgage rates, including negotiating with sellers and using rate buydowns.

A buydown allows a borrower to pay more at closing to reduce the mortgage interest rate. Seller concessions involve asking the current property owner to buy down the buyer's mortgage rate as a method to lower costs.

Using seller concessions to improve cash flow

Roughly half of regular home buyers are receiving seller concessions at present. Investors who negotiate well can extract seller concessions as part of their purchase strategy.

Seller concessions can be applied on top of a lower purchase price or used instead of a price reduction. For example, a seller might prefer to spend $20,000 buying down the buyer's mortgage rate rather than lowering the listed price from $400,000 to $380,000.

For buyers focused on generating cash flow, buying down the mortgage rate through seller concessions may be more effective than reducing the purchase price.

Regional availability of seller concessions

Seller concessions are currently easy to obtain in the majority of U.S. housing markets. They remain difficult to secure in hot markets such as San Francisco.

Under these policies, premium payments exceeding the cost of insurance are added to the cash value and credited with interest each month.

Policies are debited monthly for insurance costs and fees, which are drawn from the cash value regardless of whether a premium payment is made. The interest rate credited to an account is determined by the insurer, though the policy includes a contractual minimum rate.

Navigating buydown restrictions with Dave Meyer

Standard investor mortgages sold to Fannie Mae or Freddie Mac prohibit the use of temporary buydowns. Portfolio loans from smaller banks allow both temporary and permanent buydowns.

A temporary 3-2-1 buydown reduces the rate by three percentage points in year one, two points in year two, and one point in year three. A temporary 2-1 buydown reduces the rate by two percentage points in year one and one point in year two.

Dave Meyer is the chief investment officer at BiggerPockets and hosts the podcast episode.