Buying · Rates

What a point of rate is worth, in dollars

Where rates go next is not knowable, and the people writing about the Fed each month do not know either. What can be worked out exactly is what a move is worth to you, which is the number that decides whether to buy now or wait.

The same property at five rates

A Brockton two-family at $575,000 with 5% down, the town's FY2026 residential rate of $11.63 per thousand, $3,200 a year of insurance, one unit let at $2,100, and you living in the other.

Rate	Principal and interest	Your monthly cost	Against 6.75%	Price at the same cost
5.75%	$3,188	$2,865	−$355	$626,412
6.25%	$3,363	$3,041	−$180	$599,897
6.75%	$3,543	$3,221	baseline	$575,000
7.25%	$3,726	$3,404	+$183	$551,621
7.75%	$3,913	$3,591	+$370	$529,664

Read the last column across. Holding your monthly cost still, a move from 6.75% to 7.75% takes $45,336 off what you can pay, which is 7.9% of the price. A point of rate is worth roughly eight percent of a South Shore two-family.

Which cuts both ways, and this is the part the waiting argument leaves out. If rates fall a point and prices rise eight percent to absorb it, you have gained nothing by waiting and you have paid a year of someone else's mortgage instead of your own.

What moves mortgage rates

Mortgage rates track the 10-year Treasury yield and the spread that investors demand on mortgage-backed securities. They do not track the federal funds rate, which is an overnight bank rate. The Fed influences the long end through expectations rather than setting it, which is why mortgage rates sometimes rise on a day the Fed cuts.

The practical consequence: a headline announcing a Fed decision tells you very little about what a lender will quote you next week. Your own quote, from your own lender, on your own file, is the only rate that has ever mattered to a purchase.

If the rate is the problem, there are two other doors

An assumable FHA or VA loan carries the seller's rate rather than today's, which on a 2021 mortgage can be half of it. The catch is the gap between the balance and the price, worked through in our assumable loans guide.

And a second let unit does more for the monthly figure than any plausible rate move. A point of rate is $370 a month on this property. A second unit at market rent is several times that, which is the argument for a second unit, whether that is a two-family or a single family with an ADU, at any rate.

Questions people ask

How much does one percent of mortgage rate cost per month?

On a $575,000 South Shore two-family with 5% down, moving from 6.75% to 7.75% adds about $370 to the monthly cost. Held against a fixed monthly budget, that same point reduces what you can pay for the property by roughly $45,000, or 7.9%.

Does the Federal Reserve set mortgage rates?

No. Mortgage rates track the 10-year Treasury yield and the spread on mortgage-backed securities. The federal funds rate is an overnight bank rate. The Fed influences long rates through expectations, which is why mortgage rates sometimes rise on a day the Fed cuts.

Should I wait for rates to fall before buying?

Falling rates tend to raise prices, because buyers bid what they can afford monthly. If rates fall a point and prices rise eight percent, waiting gained nothing and cost a year of payments on someone else's mortgage.

What reduces the monthly cost more than a rate move?

A second let unit. A point of rate is worth about $370 a month on this property, while a unit at market rent is several times that.