February 25, 2024
Mortgage

Mortgage Rates on Dec. 21, 2023: Rates Retreat Over the Last Week



Photo by: Kurt Wittman/Education Images/Universal Images Group via Getty Images

Some benchmark mortgage rates trended lower over the last week. 15-year fixed and 30-year fixed mortgage rates both dwindled. For variable rates, the 5/1 adjustable-rate mortgage also decreased.

  • 30-year fixed mortgage: 7.09%
  • 15-year fixed mortgage: 6.42%
  • 5/1 adjustable-rate mortgage: 6.42%

In early November, the average rate for a 30-year fixed mortgage finally started dropping lower for the first time in months. Due to the Federal Reserve’s less restrictive monetary policy, cooling inflation and other economic data, the most common home loan is now in the 7% range.

“In the face of falling rates, mortgage demand has increased slightly over the last few weeks,” said Jacob Channel, senior economist at LendingTree. But although mortgage trends are going in the right direction, homebuying is still out of reach for many. “For affordability in the housing market to truly shift course, we’ll need to see months of sustained mortgage rate declines, as well as a continued increase in housing supply,” said Channel.


About these rates: Like CNET, Bankrate is owned by Red Ventures. This tool features partner rates from lenders that you can use when comparing multiple mortgage rates.


Today’s average mortgage interest rates

If you’re in the market for a home, check out how today’s mortgage rates compare to last week’s. We use rates collected by Bankrate to track changes in these daily rates. This table summarizes the average rates offered by lenders nationwide:

Today’s mortgage interest rates

Loan term Today’s Rate Last week Change
30-year mortgage rate 7.09% 7.27% -0.18
15-year fixed rate 6.42% 6.67% -0.25
30-year jumbo mortgage rate 7.15% 7.32% -0.17
30-year mortgage refinance rate 7.16% 7.36% -0.20

Rates as of December 21, 2023.

How to choose a mortgage

When picking a mortgage, consider the loan term, or payment schedule. The most common mortgage terms are 15 and 30 years, although 10-, 20- and 40-year mortgages also exist. You’ll also need to choose between a fixed-rate mortgage, where the interest rate is set for the duration of the loan, and an adjustable-rate mortgage. With an adjustable-rate mortgage, the interest rate is only fixed for a certain amount of time (commonly five, seven or 10 years), after which the rate adjusts annually based on the market’s current interest rate. Fixed-rate mortgages offer more stability, and they’re a better option if you plan to live in a home in the long term, but adjustable-rate mortgages may offer lower interest rates upfront.

30-year fixed-rate mortgages

The average 30-year fixed mortgage interest rate is 7.09%, which is a decline of 18 basis points compared to one week ago. (A basis point is equivalent to 0.01%.) A 30-year fixed mortgage is the most common loan term. It will often have a higher interest rate than a 15-year mortgage, but you’ll have a lower monthly payment.

15-year fixed-rate mortgages

The average rate for a 15-year, fixed mortgage is 6.42%, which is a decrease of 25 basis points from seven days ago. Though you’ll have a bigger monthly payment compared to a 30-year fixed mortgage, a 15-year loan usually comes with a lower interest rate, and will allow you to pay less interest in the long run and pay off your mortgage sooner.

5/1 adjustable-rate mortgages

A 5/1 ARM has an average rate of 6.42%, a decrease of 24 basis points compared to a week ago. You’ll typically get a lower introductory interest rate with a 5/1 ARM in the first five years of the mortgage. But you could end up paying more after that period, depending on how the rate adjusts annually. If you plan to sell or refinance your house within five years, an ARM could be a good option.

Calculate your monthly mortgage payment

Getting a mortgage should always depend on your financial situation and long-term goals. The most important thing is to make a budget and try to stay within your means. CNET’s mortgage calculator below can help homebuyers prepare for monthly mortgage payments.

Current mortgage rate trends

At the start of the pandemic, mortgage rates were near record lows, around 3%. That all changed as inflation began to surge and the Fed kicked off a series of aggressive interest rate hikes, which indirectly drove up mortgage rates. Now, 21 months after the first rate increase in March 2022, mortgage rates are still more than double what they were just a few years ago.

The central bank has kept interest rates steady since late July, and mortgage rates are just now starting to see some sustained drops. With the Fed extending its rate-hike pause in December, experts are waiting for the first rate cut. It may be months before that happens, but as long as inflation continues to moderate, mortgage rates should stabilize and start inching even lower in coming months.

What affects mortgage rates?

  • Federal Reserve monetary policy: The nation’s central bank doesn’t set interest rates, but when it adjusts the federal funds rate, mortgages tend to go in the same direction.
  • Inflation: Mortgage rates tend to increase during high inflation. Lenders usually set higher interest rates on loans to compensate for the loss of purchasing power.
  • The bond market: Mortgage lenders often use long-term bond yields, like the 10-Year Treasury, as a benchmark to set interest rates on home loans. When yields rise, mortgage rates typically increase.
  • Geopolitical events: World events, such as elections, pandemics or economic crises, can also affect home loan rates, particularly when global financial markets face uncertainty.
  • Other economic factors: The bond market, employment data, investor confidence and housing market trends, such as supply and demand, can also affect the direction of mortgage rates.

Mortgage rate forecasts from experts

While mortgage forecasters base their projections on different data, most predict rates will remain near or above 7% for the rest of 2023. Here’s a look at where some of the major housing authorities expect average mortgage rates to land at the end of the year.

Tips for finding the best mortgage rates

Though mortgage rates and home prices are high, the housing market won’t be unaffordable forever. It’s always a good time to save for a down payment and improve your credit score to help you secure a competitive mortgage rate when the time is right.

  1. Save for a bigger down payment: Though a 20% down payment isn’t required, a larger upfront payment means taking out a smaller mortgage, which will help you save in interest.
  2. Boost your credit score: You can qualify for a conventional mortgage with a 620 credit score, but a higher score of at least 740 will get you better rates.
  3. Pay off debt: Experts recommend a debt-to-income ratio of 36% or less to help you qualify for the best rates. Not carrying other debt will put you in a better position to handle your monthly payments.
  4. Research loans and assistance: Government-sponsored loans have more flexible borrowing requirements than conventional loans. Some government-sponsored or private programs can also help with your down payment and closing costs.
  5. Shop around for lenders: Researching and comparing multiple loan offers from different lenders can help you secure the lowest mortgage rate for your situation.



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