Is 7% the New Normal? Why I Am Telling My Buyers to Plan on 7.5%

The Short Version: Stop Waiting for 6%

If you are sitting on the sidelines waiting for 6% mortgage rates, here is what I am telling my borrowers: plan on 7.5%. Run your numbers at 7.5%. If the payment is comfortable there, buy the house. Anything lower becomes a pleasant surprise, not a requirement.

This is not a rate prediction. I do not know where rates are going, and neither does anyone else who is being honest with you. 7.5% is a planning number. It is the stress test I want every one of my buyers in Vancouver WA, Clark County, and the Portland metro to pass before they commit.

7% Is Not the Scary Part of History

Some perspective helps. For most of the 1990s, 30-year rates lived in the 7s and 8s. In the 1980s, they were in the 8s, 9s, and briefly the teens. People bought homes, raised families, and built wealth through all of it.

The 3% rates of 2020 and 2021 were the anomaly, not the baseline. Two years of emergency-level rates do not define what normal looks like. If you are judging today's market against 2021, you are judging it against something that was never going to last.

The Math of Waiting vs. Buying

Let me show you what waiting actually costs, using round estimates. Take a $500,000 loan. At 7.5%, the principal and interest payment is roughly $3,500 a month. At 6.5%, it is roughly $3,160. That is a difference of about $340 a month, or around $4,000 a year.

Now price the wait. If you rent for another year in Clark County while hoping for that lower rate, you have paid a year of rent with nothing to show for it. If home prices rise even 2 or 3% in that year, the house costs you $10,000 to $15,000 more, which wipes out several years of the rate savings you were chasing. And that assumes rates actually fall, which they may not.

These are estimates, not promises, and your numbers will differ. But the framework holds: waiting has a price tag, and most buyers never put it on paper.

Ways Around Today's Rate

You do not have to accept 7.5% as your final number. There are legitimate ways to pay less while you wait to see what rates do:

• Assumable mortgages: Some sellers in Clark and Cowlitz counties have FHA or VA loans with rates in the 3s, 4s, or 5s that a qualified buyer can take over. This is my favorite workaround right now. Browse current assumable listings in Clark and Cowlitz counties here.
• Temporary buydowns: A 2-1 buydown drops your rate for the first two years, paid for by the seller or builder in many cases. You get a lower payment now and the full rate later, when refinancing may be an option.
• Seller concessions: In a balanced market like much of Southwest Washington right now, sellers are contributing toward closing costs and rate buydowns. That is real money off your cost to buy.
• Discount points: Paying upfront to buy the rate down can make sense if you plan to keep the loan long enough to break even. I will run that math with you before you spend a dollar.

And If Rates Do Fall? You Refinance.

Here is the part the waiters miss. Buying at 7.5% does not lock you into 7.5% forever. If rates drop to the 6s or lower down the road, you refinance. The house, the neighborhood, and the equity you built while waiting are yours. The rate is just a loan term, and loan terms can change.

Dozens of my clients over 20-plus years bought at rates that looked high at the time and refinanced later. The ones who did best were the ones who bought the right house at a payment they could afford, not the ones who timed the market perfectly.

What I Tell My Borrowers, Plainly

Plan on 7.5%. If the payment works and the house is right, move forward. Use assumables, buydowns, and seller concessions to pay less in the meantime. Keep an eye on current rates and refinance if the opportunity comes. And if you want to see what a conventional loan looks like at 7.5% for your situation, I will run the real numbers with you.

The right time to buy is not when rates hit a magic number. It is when the payment works and the house fits your life. Call me at (360) 910-3290 and let us see where you stand.

This content is for informational and educational purposes only and does not constitute legal, tax, or financial advice. All figures are estimates for illustration. Loan approval and terms depend on your individual qualifications.