Warren Buffet's Berkshire Hathaway drops major mortgage rate revelation

After decades of stable mortgage rates, mortgages hovering between 6% and 7% have become the new standard. Though buyers may be awaiting rates to drop before committing to purchasing a home, elevated interest rates may be here to stay.

Mortgage rates above 6% may seem high compared to recent levels, but they are aligned with the 50-year averages noted by the Fed, which began monitoring mortgage rates in the 1970s.

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While heightened interest rates may seem unfavorable — especially when making a long-term financial commitment — there are several benefits to a high interest rate environment. 

Berkshire Hathaway Home Services highlights why home buyers shouldn’t necessarily wait out high mortgage rates and how they can even be advantageous. However, buyers should still beware of the pitfalls of high interest rates and ensure they can comfortably make their mortgage payments. 

Berkshire Hathaway Home Services reveals the surprising upside of high interest rates

Many home buyers see high interest rates and mortgage rates as barriers to homeownership, as they will pay more for a home in the long run due to increased monthly mortgage payments. 

However, there are a few factors to consider when buying a home, including the type of mortgage loan.

The Berkshire Hathaway Home Services blog notes that fixed-rate mortgages can help protect against rate volatility. “If you have a fixed-rate mortgage, your monthly payment remains unchanged—a strong hedge against inflation even as home prices and other costs climb.”

More on homebuying:

• Dave Ramsey warns Americans on a homebuying mistake to avoid
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• Americans buying homes may see major housing cost changes in 2025
• Finance veteran has a warning for Americans purchasing a home now

While most people want lower rates in general, that thinking ignores the benefits of higher rates. 

For instance, the blog notes high interest rates increase yields on lower-risk products, such as high-yield savings accounts, CDs, and bonds. “Additionally, higher rates help your savings and money market accounts grow faster, making it easier to build cash reserves.”

So, while higher interest rates may cause higher mortgage payments, they also generate higher returns on other investments, which can offset increased mortgage costs. 

Berkshire Hathaway Home Services shares the pitfalls of high interest rates

While high interest rates create higher earnings on financial products, they make borrowing far more expensive. Not only do payments on mortgage loans increase, but any payments on personal, business, or auto loans will rise, as will credit card debt.

The blog writes, “The disadvantage to higher interest rates is that all loans are more expensive, including credit cards, so it’s best to hunker down and keep debt to a minimum.”

Related: The White House will take surprising approach to curb mortgage rates

The debt level for U.S. households is rising across the board, reaching over $18 trillion by the end of 2024. Though the majority of outstanding debt is housing-related, Home Equity Lines of Credit (HELOC), credit card debt, and auto loan debt are all on the rise.

Delinquencies on mortgage loans and credit cards have seen a consistent uptick, indicating that borrowers are finding it increasingly difficult to pay off housing and credit card debt.

While high interest rates offer certain benefits, it is crucial that home buyers assess the mortgage rate and monthly payment they can afford and are comfortable with.

Related: Veteran fund manager unveils eye-popping S&P 500 forecast

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