The US economy is in a tricky spot. To close out 2023, fourth quarter GDP measured at a robust 3.3% annual growth rate, but inflation remains above the Fed’s desired 2% target, so the central bank has yet to cut interest rates. Still, many expect that rate cuts will come this year as the economy and inflation cool down more. For the mortgage market, that could also mean that rates come down.
Already, 30-year mortgage rates have fallen from recent highs. While they reached approximately 8% in October 2023, they now average 6.63% as of the beginning of February 2024, according to Freddie Mac.
But what will happen the rest of the year? Below, we’ll look at three possible mortgage rate scenarios.
If you’re in the market to buy a home then start by exploring your mortgage rate options here now.
Will mortgage rates drop below 6% in 2024?
Here are three possible scenarios for mortgage rates this year, according to the experts we spoke to.
Mortgage rates will drop below 6%
Mortgage rates could continue to trend downward this year, especially once the Fed starts cutting the federal funds rate.
“Mortgage rates will go down in 2024. How much and when depends on the economy and inflation. I believe that we will see rates trending to 6% in the summer, perhaps not until late summer,” says Melissa Cohn, regional VP at William Raveis Mortgage. After that, “I believe that rates will drop below 6% and stay below 6% for the year.”
Some experts predict an even larger drop, though still not at pandemic-era levels.
“I believe they will fall to 4.25%,” says Dan Green, CEO at Homebuyer.com. “Inflation is solved, lenders are competitive, and the bond market is finding its health.”
See how low of a mortgage rate you could get now.
Mortgage rates will drop somewhat but not below 6%
While some people think that mortgage rates will fall further, not everyone is convinced that they’ll drop significantly from their current levels. As mentioned, GDP remains strong, and lower rates tend to coincide with a weakening economy, which might not occur.
Shannon Feick,co-owner and co-founder at ASAP Properties, LLC, says he’s “confident that the relatively strong economy will likely prevent rates from falling below 6% in 2024, but with inflation cooling, mortgage rates will fall slightly from their current levels.”
Still, it’s possible that the economy’s health and inflation rate get thrown off by unexpected events, like how geopolitical conflicts have caused oil price swings, which can ultimately influence interest rate decisions.
“I do believe that curveballs like geopolitical events or significant shifts in the job market could alter this forecast, but only by a small amount,” says Feick.
Mortgage rates will stay the same
Another scenario could be that rates end up staying essentially the same, with mid-6% interest rates persisting.
“I think rates will stay flat on average this year, meaning that they will stay in the mid-6s, which is where we dropped to at the end of the year, going into 2024,” says Sam Sharp, executive VP of mortgage lending at Guaranteed Rate.
It’s also possible that rates go higher, but Sharp thinks that the current levels seem to be working.
“I believe that the markets have tested their threshold. When rates capped over 8% the housing market saw a steep decline. As soon as rates dropped into the mid-6s we saw a quick change, and this looks to be a sweet spot in the current environment,” he says.
“Not only is this a level that buyers seem more comfortable with, but I feel this is a good baseline for some sellers, and their motivation is what we need to create a balanced housing market,” explains Sharp.
Learn more about today’s mortgage rates online here.
The bottom line
It’s hard to predict exactly where mortgage interest rates will go in 2024, as much depends on factors like the state of the economy and how the Fed responds to inflation. But if you can afford to buy a home now at current levels, you might be better off doing so for two main reasons.
One, it’s hard to say how long you’ll have to wait for rates to drop — if they do at all — and you might not want to put your home search on hold indefinitely. Two, a decrease in mortgage rates could increase competition among homebuyers, as those who have been waiting for rates to drop might jump in, thus complicating the process.
However, one advantage of waiting to buy a home could be that more sellers jump in, too. Some sellers have been reluctant to give up their homes and then buy a new one at high mortgage rates. But if rates do drop, or if sellers simply get more accustomed to current rates as the new normal, then that could increase inventory.
So, you’ll have to weigh these factors, along with looking at your finances and the local conditions in your desired area to see what makes the most sense for you. And while you probably don’t want to bank on it, mortgage refinancing could be an option down the road if rates drop further.
Start exploring your current mortgage rate options here.
The vibrant heart of North Texas, Dallas has a diverse culture, iconic landmarks and Southern hospitality, all making it a great place to live. But did you know it also features affordable suburbs?
If you’re considering moving to Dallas, you may be wondering how much rent costs in Dallas. The average monthly rent is $1,477 for a studio, $1,371 for a one-bedroom unit and $1,862 for a two-bedroom unit. Depending on your budget, these prices may not align with your renting priorities.
So, if you’re searching for a more budget-friendly area without compromising access to Dallas, you’re in the right place. In this article, we’ll explore five of the most affordable Dallas suburbs. That way, you can enjoy Dallas’ sights and amenities without the price tag.
Average rent for a one-bedroom: $1,045
Average rent for a two-bedroom: $1,450
Distance from Dallas: 14 miles
Apartments for rent in Duncanville
Claiming the first place on our list of affordable Dallas suburbs is Duncanville. On average, you’ll save about $400 on rent for a one-bedroom apartment. Nicknamed the City of Champions, this area is located approximately 14 miles southwest of Dallas, so you’re not too far from the city center.
In Duncanville, you can experience the charm of the historic downtown district, filled with quaint shops, delicious dining options and cultural events. The city also offers recreational opportunities at Armstrong Park, where you can enjoy picnicking and walking trails, making it a great destination for outdoor enthusiasts.
Average rent for a studio: $1,039
Average rent for a one-bedroom: $1,215
Average rent for a two-bedroom: $1,430
Distance from Dallas: 15 miles
Apartments for rent in Mesquite
The second suburb on our list is Mesquite, just 15 miles east of Dallas. The area is home to about 147,700 residents, and the average rents are much less than in Dallas. If you plan to rent a two-bedroom unit, the monthly cost is approximately $1,430.
Mesquite has plenty of awesome attractions, including the Mesquite Championship Rodeo, where you can experience the excitement of live rodeo events, making it an easy pick for our top affordable Dallas suburbs. Additionally, the city offers the Mesquite Arts Center, featuring art exhibitions, performances and cultural events throughout the year.
Average rent for a studio: $1,560
Average rent for a one-bedroom: $1,314
Average rent for a two-bedroom: $1,664
Distance from Dallas: 13 miles
Apartments for rent in Irving
For those on the hunt for budget-friendly suburban living near Dallas, Irving takes third place. In addition to more affordable prices, Irving is just 13 miles west of downtown Dallas.
You can explore the Irving Arts Center, which hosts art exhibitions, performances and events in Irving. The city is also home to the Mandalay Canal Walk, a picturesque area with winding waterways, gondola rides and a variety of dining options, offering a one-of-a-kind setting.
Average rent for a studio: $1,491
Average rent for a one-bedroom: $1,330
Average rent for a two-bedroom: $1,625
Distance from Dallas: 14 miles
Apartments for rent in Grand Prairie
Grand Prairie, which is around 14 miles to the west, offers an affordable suburban alternative. In Grand Prairie, you can check out Lynn Creek Park at Joe Pool Lake, with opportunities for boating, swimming and hiking amidst the picturesque lakeside surroundings. The city is also home to the Texas Trust CU Theatre, a popular venue for concerts, comedy shows and other live entertainment.
Average rent for a studio: $1,053
Average rent for a one-bedroom: $1,379
Average rent for a two-bedroom: $1,747
Distance from Dallas: 15 miles
Apartments for rent in Garland
Just 15 miles from downtown is Garland, the final of the affordable Dallas suburbs to make our list. Home to 242,000 residents, Garland can be a great option for renters looking for a less busy city — and affordable rental prices. While the rent for a one-bedroom unit may be slightly higher in Dallas, a two-bedroom unit costs just over $100 less in Garland.
Living in Garland, you can explore the beautiful Spring Creek Forest Preserve, which offers hiking trails, wildlife viewing and a serene escape into nature. The city also features the Granville Arts Center, a cultural hub with theaters and art galleries that host a variety of performances and exhibitions. If you’re looking to take the leap from renter to buyer, make sure to also check out the most affordable Dallas suburbs to buy a home.
Is Dallas for you?
In a city as vibrant and diverse as Dallas, discovering the best bang for your buck is like finding hidden treasures in a sprawling urban jungle. Navigating through the maze of neighborhoods, we’ve unearthed the gems that not only won’t break the bank but might just leave you with some extra cash for those irresistible Tex-Mex dinners.
So, as you embark on your quest for the perfect pad, rest assured that the cheapest places in Dallas aren’t just affordable – they’re the keys to unlocking a city full of opportunities and adventures. Your wallet will thank you, and so will your sense of wanderlust. Cheers to finding your piece of budget-friendly paradise in a Dallas apartment in the heart of the Lone Star State!
Methodology
Affordability in our study of affordable Dallas suburbs is based on whether a suburb’s one and two-bedroom rent was less than Dallas and under 15 miles from downtown Dallas. Average rental data from Dallas rental market trends on October 26, 2023. Population data sourced from the United States Census Bureau.
Inflation remained stubbornly high in January, possibly pushing back any interest rate cuts by the Federal Reserve. Still, the long line graph indicates a cooling trend, albeit a bumpy one. Nevertheless, lenders have already begun lowering mortgage rates in anticipation of any cuts to the federal funds rate. According to Freddie Mac, the rate on a conventional 30-year fixed-rate mortgage is currently 6.90%, down from 7.79% in late October.
The good news for homeowners is that despite dips in some areas, prices are generally holding steady and preserving home equity for owners. A 2023 report from the real estate analytics firm CoreLogic says the average homeowner in the U.S. holds $300,000 in home equity.
With lower interest rates than other forms of lending, home equity loans may be a good option for borrowers. The best lending option depends on a several factors, including the loan amount, borrowing costs and your time horizon for repayment. However, a home equity loan could be a better option than the below five alternatives in specific situations.
Considering tapping into your home equity? See what interest rate you could qualify for here now.
Why a home equity loan is better than these 5 alternatives
Here are five lending options that a home equity loan may be preferable to.
Credit cards
As of February 27, the average home equity loan interest rate is 8.78%. That’s substantially lower than the average credit card interest rate of 22.75%, according to the Federal Reserve. If you’re looking to borrow a substantial amount, such as $50,000 for a home renovation project, you could save thousands of dollars in interest charges over the life of the loan.
“When you need a sizable sum and can repay it over a longer period, a home equity loan is the better choice,” says Mike Roberts, co-founder of City Creek Mortgage. “The interest rates on home equity loans are generally lower, making them more cost-effective.”
Keep in mind, home equity loans use your house as collateral, which means the bank could foreclose on your home if you default on the loan. If you need a smaller amount, a credit card or other alternative may be less risky, especially if you can repay the amount quickly.
Compare your home equity loan options here to learn more.
Personal loans
As with credit cards, home equity loans may be preferable to personal loans because they usually come with lower interest rates. They also have higher borrowing limits, up to 75% to 85% of your home’s equity. As mentioned, U.S. homeowners have an average of $300,000 in equity, which means they could potentially borrow from $225,000 to $255,000. By contrast, borrowing amounts on personal loans typically don’t exceed $100,000. If you’re consolidating a substantial amount of debt or undertaking a pricey home improvement project, the higher borrowing limit and lower rates may be advantageous.
Bill Westrom, the CEO and founder of TruthInEquity.com, advises borrowers refrain from borrowing the maximum amount, even if they qualify. “If we use 2008 to 2009 as a teaching lesson when home values fall, you might find yourself in a negative equity position that might take years to recover from.”
Cash-out refinance loans
If you took out your current mortgage before 2022, you likely have a more favorable rate than what you’ll find on the market now. Specifically, mortgages taken out between 2019 and 2021 have average interest rates below 4.00%. Refinancing at today’s higher rates doesn’t make much sense. A home equity loan allows you to access the funds you need without changing the terms of your original mortgage.
“If you have a first mortgage with an interest rate of 4.00% or less, do not ever let it get away,” says Westrom. “There really is no complimentary argument for the cash-out refinance if you have a low, low rate already.”
Home equity lines of credit (HELOCs)
While home equity lines of credit (HELOCs) include many of the same benefits as home equity loans, there are times when the latter can be more advantageous. For starters, home equity loans can provide you with a large sum of money upfront, whereas HELOCs are designed to draw funds as needed over time.
Additionally, home equity loans come with fixed interest rates, while HELOCs typically have variable ones. With a stable rate and payment that remains the same throughout the loan, a home equity loan is more predictable and easy to manage. It also can save you on interest charges as it isn’t subject to interest rate fluctuations.
Learn more about your HELOC options here.
401(k) loans
Both a 401(k) loan and a home equity loan allow you to “borrow from yourself.” A 401(k) loan allows you to borrow up to $50,000 in emergency cash from your retirement plan, and pay yourself back within five years with interest, usually a point or two higher than the current prime rate.
However, borrowing from your 401(k) comes at a massive opportunity cost. The money you withdraw will no longer earn interest, and it could take years to regain your former account position. During those five years of repayment, you could forfeit your employer’s matching contributions, and the lower account balance will yield less earnings.
With a home equity loan, you’ll pay interest charges, and the risk to your home must be strongly considered. However, a well-planned home equity loan with affordable payments could be considered a more favorable option than depleting your retirement savings.
The bottom line
A home equity loan can be more advantageous than the alternatives above in many situations, but not always. Deciding whether to get a home equity loan, one of these five alternatives or another financing option should be based on how each option addresses your unique circumstances. Explore your options and read the fine print before proceeding with any loan offers. Finally, make sure you can comfortably afford the payments on any new loan or credit you’re considering before taking on new debt.
Matt Richardson
Matt Richardson is the managing editor for the Managing Your Money section for CBSNews.com. He writes and edits content about personal finance ranging from savings to investing to insurance.
Margin accounts give investors the ability to borrow money from a brokerage to make bigger trades or investments than they would have been able to make otherwise. Just as you can borrow money against the equity in your home, you can also borrow money against the value of certain investments in your portfolio.
This is called margin lending, and it happens within a margin account, which is a type of account you can get at a brokerage. Most brokerages offer the option of making a taxable account a margin account. Tax-advantaged retirement accounts, such as traditional IRAs or Roth IRAs, generally are not eligible for margin trading.
What Is a Margin Account?
As mentioned, a margin account is used for margin trading, which involves borrowing money from a brokerage to fund trades or investments.A margin account allows you to borrow from the brokerage to purchase securities that are worth more than the cash you have on hand. In this case, the cash or securities already in your account act as your collateral.
Margin accounts are generally considered to be more appropriate for experienced investors, since trading on margin means taking on additional costs and risks.
When defining a margin account, it helps to understand its counterpart — the cash account. With a cash brokerage account, you can only buy as many investments as you can cover with cash. If you have $10,000 in your account, you can buy $10,000 of stock.
Margin Account Rules and Regulations
When it comes to margin accounts, the Securities and Exchange Commission (SEC), FINRA, and other bodies have set some rules:
• Minimum margin: There is a minimum margin requirement before you can start trading on margin. FINRA requires that you deposit the lesser of $2,000 or 100% of the purchase price of the stocks you plan to purchase on margin.
• Initial margin: Your margin buying power has limits — generally you can borrow up to 50% of the cost of the securities you plan to buy. This means, for example, that if you have $10,000 in your margin account, you can effectively purchase up to $20,000 of securities on margin. You would spend $10,000 of your own money and borrow the other 50% from the brokerage. (You can also borrow much less than this.) Your buying power varies, depending on the value of your portfolio on any given day.
• Maintenance margin: Once you’ve bought investments on margin, regulators require that you keep a specific balance in your margin account. Under FINRA rules, your equity in the account must not fall below 25% of the current market value of the securities in the account. If your equity drops below this level, either because you withdrew money or because your investments have fallen in value, you may get a margin call from your brokerage.
Example of a Margin Account
An example of using a margin account could look like this: Say you have a margin account with $5,000 in cash in it. This allows you to use 50% more in margin, so you actually have $10,000 in purchasing power – you are able to actually make a trade for $10,000 in securities, using $5,000 in margin.
In effect, margin extends your purchasing power as an investor, and you’re not obligated to use it all. 💡 Quick Tip: When you’re actively investing in stocks, it’s important to ask what types of fees you might have to pay. For example, brokers may charge a flat fee for trading stocks, or require some commission for every trade. Taking the time to manage investment costs can be beneficial over the long term.
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Borrow against your current investments at just 10%* and start margin trading.
Benefits of a Margin Account
For an experienced investor who enjoys day trading, having a margin account and trading on margin can have some advantages:
• More purchase power. A margin account allows an investor to buy more investments than they could with cash. That might lead to higher returns, since they’re buying more securities and may be able to diversify their investments in different ways.
• A safety net. Just as an emergency fund offers access to cash when you need it, so does a margin account. If you need funds but you don’t want to sell investments at their current price point, you can take a margin loan for short-term cash needs.
• You can leave your losers alone. In another scenario, if you need cash but your investments aren’t doing so well, taking a margin loan allows you to keep your securities where they are instead of selling them right now at a loss.
• No loan repayment schedule. There is no repayment schedule for a margin loan, so you can repay it at any rate you please, as long as your equity in the account maintains the proper threshold. Monthly interest will accrue, however, and be added to your account.
• Potentially deductible interest. There may be tax situations in which the interest in a margin loan can be used to offset taxable income. A tax professional will tell you whether this is a move you can consider.
Drawbacks of a Margin Account
Despite the advantages, using a margin account has risks. Here are some things to consider before trading on margin:
• You could lose substantially. While it’s possible that trading on margin can help realize greater returns if an investment does well, you will also see greater losses if an investment takes a dive. And even if an investment you’ve purchased on margin loses all of its value, you’ll still owe the margin loan back to the brokerage — plus interest.
• There may be a margin call. If your investments tank, it’s possible that you’ll have to sell securities or deposit additional funds to bring your account back up to the required margin threshold. It’s also possible for a brokerage to sell securities from your account without alerting you.
How to Open a Margin Account
Opening a margin account is as simple as opening a cash account, but you’ll likely need to sign a margin agreement with your brokerage. You may also need to request margin for your account, depending on the brokerage.
But there are some other things to keep in mind.
If you’re a beginner investor, a cash account gives you an opportunity to learn how to trade and invest, and there’s a low level of risk. If you’re a more experienced investor and fully understand the risks of trading on margin, a margin account may offer the opportunity to expand and diversify your investments.
Some financial advisors suggest that clients open margin accounts in case they need cash in a hurry. For instance, if you need money quickly, it takes time to sell investments and for the money to be deposited in your account. If you have a margin account, you can take a margin loan while your securities are being sold. Typically, margin accounts don’t carry any additional fees as long as you aren’t borrowing on margin.
You also need a margin account for short selling. With short selling, you borrow a stock in your brokerage account and sell it for its current price. If the price of the stock falls — which you’re betting will happen — you repurchase shares of the stock and return it to the original owner, pocketing the difference in price.
Like trading on margin, short selling is a strategy for experienced investors and comes with a large amount of risk.
Things to Know About Margin Accounts
Here are a few other things to keep in mind about margin accounts.
Margin Calls
Margin calls are a risk. If the equity in your margin account drops below a certain threshold, you may get an alert from your brokerage, called a margin call. This is meant to spur you to either deposit more money into your account or sell some securities to bolster the equity that’s acting as collateral for your margin loan.
It’s worth noting that if your investment value drops quickly or significantly, you may find that your brokerage has sold some of your securities without notifying you. Commonly, investors are forced by a margin call to sell investments at an inopportune time — such as when the investment is priced at less than you paid for it. This is an inherent risk of trading on margin.
Margin Costs
Investors should also know about relevant margin costs. When you borrow money from the brokerage to buy securities, you are essentially taking out a loan, and the brokerage will charge interest. Margin interest rates are different from company to company, and may be somewhat higher than rates on other kinds of loans.
Consider interest costs when you’re thinking about your margin trading plan. If you use margin for long-term investing, interest costs can affect your returns. And holding investments on margin means the value of your securities must hold steady. 💡 Quick Tip: Look for an online brokerage with low trading commissions as well as no account minimum. Higher fees can cut into investment returns over time.
How to Manage Margin Account Risk
If you decide to open a margin account, there are steps you can take to try to minimize the amount of risk you’re taking by leveraging your trading:
• Skip the dodgy investments. Trading on margin works if you’re earning more than you’re paying in margin interest. Speculative investments can be a risky portfolio move, since a swift loss in value can result in a margin call.
• Watch your interest costs. Although there is no formal repayment schedule for a margin loan, you’re still accruing interest and you are responsible for paying it back over time. Regular payments on interest can help you stay on track.
• Maintain some emergency cash. Having a cushion of cash in your margin account gives you a little wiggle room to keep from facing a margin call.
The Takeaway
A margin account is an account that lets you borrow against the cash or securities you own, to invest in more securities. As with other lending vehicles, margin accounts do charge interest.
While margin accounts do come with risk — including the risk of losing more money than you originally had, plus interest on what you borrowed — they also offer benefits including more purchasing power and a safety net for short-term cash needs. If you’re unsure about using a margin account, it may be worthwhile to discuss it with a financial professional.
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FAQ
Is a margin account right for me?
A margin account may be a good tool for a specific investor if they’re comfortable taking on additional risks and investment costs, but also want to extend their purchasing power.
How much money do you need to open a margin account?
Before opening a trading account, investors will need a minimum of $2,000 in their brokerage account, per regulator rules.
Is a margin account taxable?
Any capital gains earned by using a margin account will be subject to capital gains tax, and the ultimate rate will depend on a few factors.
Should a beginner use a margin account?
It may be best for a beginner to stick to a cash account until they learn the ropes in the markets, as using a margin account can incur additional risks and costs.
Who qualifies for a margin account?
Most investors qualify for a margin account, granted they can reach the minimum margin requirements set forth by regulators, such as having $2,000 in their brokerage account.
What’s the difference between a cash account and a margin account?
A cash account only contains an investor’s funds, while a margin account offers investors additional purchasing power by giving them the ability to borrow money from their brokerage to make bigger trades.
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If you’re in the market for a home, here are today’s mortgage rates compared to last week’s.
Loan type
Interest rate
A week ago
Change
30-year fixed rate
7.18%
7.10%
+0.08
15-year fixed rate
6.64%
6.51%
+0.13
30-year jumbo mortgage rate
7.11%
7.02%
+0.09
30-year mortgage refinance rate
7.19%
7.10%
+0.09
Average rates offered by lenders nationwide as of Feb. 29, 2024. We use rates collected by Bankrate to track daily mortgage rate trends.
Mortgage rates change every day. Experts recommend shopping around to make sure you’re getting the lowest rate. By entering your information below, you can get a custom quote from one of CNET’s partner lenders.
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.
How to select a mortgage term and type
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 are 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 30-year fixed-mortgage rate average is 7.18%, which is an increase of 8 basis points from seven days 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 6.64%, which is an increase of 13 basis points from seven days ago. Though you’ll have a bigger monthly payment than a 30-year fixed mortgage, a 15-year loan usually comes with a lower interest rate, allowing 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 6.35%, a slide of 1 basis point compared to last week. 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 pay 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.
What to know about today’s mortgage rates
High inflation and the Federal Reserve’s aggressive interest rate hikes drove up mortgage rates over the last several years. Toward the end of last year, however, the Fed announced that interest rate cuts were on the table for 2024. That projection led to a significant drop in mortgage rates, pushing them into the 6% range. Since early February, however, mortgage rates have climbed back above 7% in response to strong economic data.
30-year fixed mortgage: 7.18%
15-year fixed mortgage: 6.64%
5/1 adjustable-rate mortgage: 6.35%
Where mortgage rates are headed in 2024
Experts say interest rate cuts from the Fed will allow mortgage rates to ease, though the first cut won’t likely come until May or June, depending on how quickly inflation decelerates.
“We are expecting mortgage rates to fall to around 6.5% by the end of this year, but there’s still a lot of volatility I think we might see,” said Daryl Fairweather, chief economist at Redfin. “It’s possible that rates might go up before they go down again, so that’s why we’re still being conservative with rates being around 6.5%.”
Each month brings a new set of inflation and labor data that can change how investors and the market respond and what direction mortgage rates go, said Odeta Kushi, deputy chief economist at First American Financial Corporation. “Ongoing inflation deceleration, a slowing economy and even geopolitical uncertainty can contribute to lower mortgage rates. On the other hand, data that signals upside risk to inflation may result in higher rates,” Kushi said.
While mortgage forecasters base their projections on different data, most experts and market watchers predict rates will move toward 6% or lower by the end of 2024. Here’s a look at where some major housing authorities expect average mortgage rates to land.
What factors affect mortgage rates?
While it’s important to monitor mortgage rates if you’re shopping for a home, remember that no one has a crystal ball. It’s impossible to time the mortgage market, and rates will always have some level of volatility because so many factors are at play.
“Mortgage rates tend to follow long-date Treasury yields, a function of current inflation and economic growth as well as expectations about future economic conditions,” says Orphe Divounguy, senior macroeconomist at Zillow Home Loans.
Here are the factors that influence the average rates on home loans.
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.
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.
How to find 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.
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.
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.
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.
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.
Shop around for lenders: Researching and comparing multiple loan offers from different lenders can help you secure the lowest mortgage rate for your situation.
Inside: Secure your financial future with insights into the top appreciating assets. Find the best appreciating assets and learn how to grow wealth with strategic investments.
Asset appreciation isn’t just an economic term; it’s the fuel that powers wealth creation. Think of appreciating assets as the golden geese, steadily laying valuable eggs that grow in size over time.
This is a crucial concept that triumphs and what you own can become the cornerstone of your financial success.
Asset appreciation isn’t just a buzzword; it’s the driving force behind significant wealth accumulation.
Whether you’re just starting or looking to expand your portfolio, understanding the role appreciation plays can mean the difference between mediocrity and staggering success.
Now, let’s dig in and help move your net worth higher.
What Are Appreciating Assets?
Appreciating assets are the golden geese of the investment world. They are the powerful engines that drive your net worth higher over time.
When you invest in assets like real estate, stocks, and even fine art, you’re placing a bet on their future value.
Unlike the car that loses value the moment you drive it off the lot, these assets typically gain worth, supernova-style, expanding your financial universe with every passing year.
How do assets appreciate in value?
Appreciation, at its core, is an asset’s journey from ‘worth X’ to ‘worth X and beyond’. But how does this magical wealth-building happen?
Several factors can give assets a financial boost.
For starters, the traditional law of supply and demand plays a huge role—if more people want it and there’s not enough to go around, the value goes up.
Toss in the influence of interest rates, economic growth, and geopolitical stability, and you have a mix that can push asset value into new echelons.
Even inflation can be a friend to assets, increasing their nominal value over time.
Remember, appreciation isn’t a given; it’s a hopeful trajectory bolstered by market forces and wise decision-making. You want to hop onto the appreciation train with assets that offer the promise of increasing in value, not just for now, but well into the future.
How to increase net worth with appreciating assets
Increasing your net worth with appreciating assets is like laying bricks for a financial fortress—it requires strategy, patience, and a mix of assets that have a history or strong potential for growth.
Start by assessing your current holdings and considering where you can diversify with assets that shine in appreciation prospects. It’s a game of balance, where you mix higher-risk, high-reward options with stable, gradual growers.
Make a habit of routinely re-evaluating your assets, keeping in mind economic trends and your personal goals. Sometimes, this may mean letting go of underperformers in favor of assets with brighter horizons.
Consider leveraging tax-advantaged accounts and investment strategies to maximize your wealth growth.
Most importantly, ensure liquidity so you can capitalize on new opportunities. Having liquid assets means you won’t miss out when the next big appreciating asset comes knocking.
Top 5 Appreciating Assets You Must Own
#1 – Stocks with High Growth Potential
Stocks are the daredevils of the investment world, particularly those brimming with high growth potential. They’re the kind that can catapult your net worth to the stratosphere if chosen wisely.
Tech giants like Nvidia, Microsoft, Google, Amazon, and Meta are testament to this—their growth over the decades has turned modest investments into fortunes.
Investing in high-growth potential stocks is like spotting a gem in the rough – if you spot the right ones, your financial prospects could shine brightly. You must learn how to invest in stocks for beginners.
Personally, I cannot stress how important it is to learn how to invest in the stock market as I can attest this is how you quickly grow your net worth.
Best For: Investors with a higher risk tolerance who are aiming for greater returns or dividend stocks and have the patience to weather market fluctuations.
#2 – ETFs to Streamline Investments for Optimal Performance
Exchange-Traded Funds (ETFs) are the investment world’s multitaskers, pooling the potential of various assets for optimum performance. By offering a diversified portfolio within a single share, they allow investors to spread their risk while reaping the growth benefits of different markets and sectors.
ETFs provide an easy and efficient way to diversify investments, reducing risk while still offering growth opportunities. They’re especially game-changing for those who prefer a “set and forget” strategy, as many ETFs are designed to passively track indexes or sectors. Many track the S&P, so you can easily invest in the overall market.
They’re cost-effective, often having lower fees than traditional mutual funds, and are accessible to investors with varying levels of experience.
Best For: Both beginners and experienced investors looking for a blend of simplicity, cost efficiency, and diversification in their investment strategy.
#3 – Real Estate: A Staple in Appreciating Assets
Real estate has long stood as a bulwark in the investment community, a reliable appreciator that doubles as both a tangible asset and a potential home. It’s a market marked by stability and a historical uptrend in value, making it a classic choice for those seeking long-term wealth growth.
Owning property is synonymous with the very concept of asset growth, with the power to withstand economic ebbs and flows. Location continues to be the drumbeat to its rise in value – a prime spot can transform a simple parcel into a gold mine.
Plus it is a tangible asset that provides utility and can serve as a hedge against inflation.
Whether it’s through REITs, crowdfunding platforms like Fundrise, or direct ownership, real estate can anchor your investment strategy on solid ground.
Best For: Investors seeking a tangible asset with a dual aim of long-term capital appreciation and passive rental property income. Ideal for those ready to manage properties or hire management, and for those who can handle the responsibilities of ownership.
#4 – Your Own Business: Betting on Your Entrepreneurial Spirit
Your own business isn’t just a job, it’s a reflection of your passion and an opportunity to control your financial destiny. When successfully executed, a business can become one of the most valuable appreciating assets, offering unparalleled autonomy and potentially substantial economic rewards.
Starting a business can lead to exponential wealth growth as the company expands and becomes profitable.
Your business’s value can significantly increase over time, making it a formidable asset in your net worth.
Owning a business is not just about the profits; it’s a journey of personal growth, resilience, and the triumph of turning passion into paychecks. It’s a path that can lead to great wealth, especially when one approaches it with clear strategy and unquenchable enthusiasm.
Best For: Individuals with entrepreneurial spirit, a viable business idea, and the readiness to invest time and capital into a long-term venture. Suitable for those who are tenacious and willing to face the challenges of entrepreneurship head-on.
#5- Self-Investment: The Ultimate Asset with Infinite Returns
Investing in yourself is like planting a seed that grows into a sturdy, towering tree, sheltering your financial future.
This investment can unlock doors to better opportunities, higher incomes, and greater job satisfaction. Whether it’s through education, health, or personal development, the returns on self-investment can be limitless.
Personal development often correlates with higher levels of personal and financial success.
Remember, when you invest in yourself, you become capable of crafting a life that not only brings in wealth but also contentment and a deeper sense of success.
Best For: Any individual seeking to enhance their career trajectory, entrepreneurship potential, or personal satisfaction. This approach is ideal for those who are committed to lifelong learning and self-improvement.
Other Examples of Appreciating Assets You Can Own
The Role of Bonds in a Diverse Securities
Bonds, those steadfast soldiers of the investment world, offer a buffer of safety amid the high-flying volatility of other assets. In a diversified portfolio, bonds contribute stability and predictable income, making them an essential element for many investor’s strategies.
They provide a fixed income stream with less volatility than stocks, acting as a cushion in economic downturns.
Bonds can offer a balance in investment holdings, mitigating risk and providing steady returns. Just make sure the returns are higher than an interest-bearing money market account.
Best For: Investors seeking to balance their portfolio with a lower-risk asset or those nearing retirement who prioritize income and stability over high growth.
Cryptocurrencies: The Digital Gold of Tomorrow?
Cryptocurrencies have emerged as the mavericks of appreciating assets, offering a wild ride with the allure of high-stakes jackpot payouts. As the “digital gold” of the modern era, they encapsulate the spirit of decentralization and technological innovation.
While their volatility can stir up investor heartbeats, their dramatic price appreciation stories make them impossible to ignore for those seeking the thrill of potentially explosive gains.
Even as the cryptocurrency markets continue to ebb and flow, they offer a unique proposition in wealth growth strategies—a high-risk, high-reward horizon that has many gazing toward the future with wallets in hand.
Best For: Tech-savvy investors with a high risk tolerance, seeking to diversify with a modern asset class that has considerable growth potential.
Fine Art and Collectibles: Value Beyond Beauty
Fine art and collectibles are not just a feast for the eyes; they’re also a banquet for your investment portfolio.
These assets bring value that transcends their aesthetic appeal, becoming cherished as cultural treasures and financial boons alike. With the intrinsic charm of rarity and historical significance, art pieces and collectibles can appreciate substantially over time, especially when curated with an expert eye.
For instance, this rare portrait of George Washington is expected to fetch $2.5 million at an upcoming auction.1
Best For: Connoisseurs with a passion for the arts or history, and investors looking for long-term, value-holding assets that also serve as cultural and personal investments. Ideal for those with substantial capital ready to navigate the less liquid markets.
Precious Metals: Why Gold and Silver Remain Attractive
Gold and silver aren’t just the treasures of lore—they’re enduring staples for those looking to fortify their wealth. Their allure lies in their history, intrinsic value, and the stability they can provide when economic tides turn tumultuous. Gold and silver are known for their resilience during economic downturns and inflationary periods. As such, learn how to invest in precious metals.
They are tangible, finite resources with universal value, often resulting in consistent demand.
Best For: Investors looking to hedge risks or seeking a stable store of wealth.
Prospects of Private Equity in Upcoming Markets
Private Equity (PE) forms the backbone for the next wave of market disruptors and innovators. Investing in private companies, especially in emerging markets, can yield substantial capital appreciation as these businesses grow and mature, sometimes well before they hit the public sphere.
This has significant potential for appreciation as companies scale up their operations and increase their market footprint.
Best For: Sophisticated investors with a high-risk tolerance and a long investment horizon. They typically have a significant amount of capital to invest and are looking for opportunities outside of public markets to achieve potential high returns.
Venture Capital’s Role in Shaping Future Wealth
Venture Capital (VC) is the financial catalyst that turns innovative startups into tomorrow’s industry leaders. By injecting capital into early-stage companies, VC not only generates the potential for staggering returns but also plays a critical role in shaping future markets and consumer trends.
It plays a critical role in shaping the business landscape of tomorrow by investing in innovation today. With its penchant for high-risk ventures, VC remains an appealing asset class for those with a futuristic vision who are keen to be part of the next big thing.
Venture capital isn’t merely about capital gains; it’s an embrace of progress, a stake in the evolution of industries, and a partnership with the brightest minds of a generation.
Best For: Investors who have a deep understanding of emerging markets and technologies, a high-risk tolerance, and the patience for long-term investment. Also ideal for those who wish to actively participate in the entrepreneurial process and impact the future direction of new businesses.
The Thriving Market for Vintage Automotive Collectibles
Vintage automotive collectibles are revving up the collectibles market with a roar.
Car enthusiasts and investors alike recognize that certain classic models don’t just retain their charm; they accelerate in value over time. The emotional connection, the engineering legacy, and the nostalgia factor turn these vehicles into appreciating assets with a personal touch.
Plus they offer a tangible investment that can be appreciated both visually and through the driving experience.
Best For: Auto enthusiasts who appreciate the craftsmanship of vintage models and are prepared for the hands-on involvement required. Most may see them as a collectible rather than an investment.
Sports Memorabilia as Lucrative Investments
Sports memorabilia takes you on a trip down memory lane, connecting you to pivotal moments and legends of the past. This nostalgia mixed with exclusivity propels their value, making them sought-after assets in the realm of investing.
The emotional and sentimental value tied to sports icons and historical moments can drive considerable investment interest and demand.
Best For: Sports fans who want to combine their passion with investment potential and like to show off their memorabilia.
Land: The Original Real Estate Investment
Land is the progenitor of all real estate investments, offering a blank canvas for potential development or holding value as a scarce resource. With an appeal that has stood the test of time, land remains one of the most fundamental appreciating assets in the investment portfolio.
It is a finite resource; they’re not making any more of it, so demand can only go up as supply remains constant.
Increases in development, population growth, and changes in land zoning can significantly enhance land value over time.
Best For: Investors seeking to hedge against inflation and looking at long-term growth prospects. Land is best for those who have the capital to invest without the need for immediate returns and can wait for the right opportunity to maximize their profits.
Commodities: A Staple in Diverse Investment Portfolios
Commodities offer a slice of the global economic pie, essential for their role in everyday life—from the grain in your breakfast cereal to the petroleum powering your car. As tangible assets, commodities can provide a buffer against inflation and diversify investment portfolios. A similar case could be made for trading currencies.
Commodities, including metals, energy, and agricultural products, often increase in value with inflation and global demand. They provide an investment route less correlated with the stock market, adding portfolio diversification.
Best For: Diversification seekers and those comfortable dealing with market fluctuations who understand global economic trends. Ideal for investors who wish to hedge against inflation and have an interest in tangible or sector-specific assets.
Navigating the High-Yield Savings Landscape
High-yield savings accounts have emerged as essential vehicles for preserving and modestly growing wealth.
In 2022-2024, with interest rates eclipsing their traditional counterparts, these accounts are more relevant than ever for savvy savers seeking to keep pace with inflation. They provide a safe haven for emergency funds or short-term financial goals while offering better returns than a typical savings account.
They provide a low-risk option to grow savings with the added convenience of liquidity. Just like certificates of deposit or CDs.
Best For: Individuals aiming for a secure, accessible place to save money with a better yield than traditional banking products. Especially well-suited for those starting to build their emergency funds or setting aside cash for near-term expenses.
Peer-to-Peer Lending – A Trend to Watch for Asset Growth
Peer-to-peer (P2P) lending shakes up traditional banking by directly connecting borrowers with investors through online platforms. This asset class is gaining traction, providing a novel way to potentially generate higher returns compared to traditional fixed-income investments.
P2P lending platforms offer higher returns on investment over standard savings, as you’re effectively acting as the bank.
It’s a cutting-edge way to diversify your investment portfolio beyond traditional stocks and bonds.
Best For: Investors looking for alternative income streams and who are comfortable with the risk associated with lending money.
Intellectual Property and Patents: An Overlooked Avenue for Wealth Creation
Owning the rights to an invention or unique creation can lead to a wealth of opportunities, with patents often being a gold mine for inventors and savvy investors alike.
Patents, in particular, hold the promise of a decade-long fruitful life, offering the potential for significant monetary returns through licensing or sales.
Best For: Inventors, entrepreneurs, and investors who are versed in industries where innovations are rapidly commercialized. It’s well-suited for those able to navigate the intricacies of patent law and capable of investing in the enforcement and marketing of their IP.
Alternative Investments: Unique Opportunities for Accredited Investors
Accredited investors have the advantage of accessing a broader range of alternative investments that may not be available to the general public, offering potentially higher returns and portfolio diversification. These can include private equity, hedge funds, and exclusive real estate deals.
It’s crucial, however, for accredited investors to conduct thorough due diligence and assess their risk tolerance when allocating a portion of their portfolio to these alternative assets.
Best For: Seasoned investors looking for diversification and higher risk-reward ratios and qualify as an accredited investor.
Luxury Goods: When Opulence Equals Investment
Luxury goods are not only symbols of status and opulence but can also solidify your investment game. High-end watches, designer handbags, and exclusive jewelry collections often see their value climb, defying the usual wear-and-tear depreciation.
They resonate with collectors and enthusiasts, transforming personal indulgence into a viable investment strategy.
Best For: Investors with a penchant for the finer things in life and enthusiasts looking to blend personal enjoyment with financial gain.
Secrets of the Antique Trade: Seeking Out Hidden
The antique trade is akin to a treasure hunt, where seasoned savvy meets the thrill of discovery. Unearthing hidden gems within flea markets, estate sales, and auction houses not only provides a historical connection but can also reveal investment diamonds in the rough.
Antiques carry the potential for significant bottom line appreciation due to factors like rarity, provenance, and desirability among collectors.
Like finding this antiquated nautical map at an estate sale and now listed for $7.5 million. 2
Best For: Collectors with a passion for history and an eye for value.
What If You Have A Depreciative Asset?
If you’re holding onto a depreciative asset, it’s like grasping a melting ice cube: time can whittle away its value.
Consider selling to repurpose the capital into something that appreciates, upgrading to a more efficient model, or simply using it fully before its value dips too low. Each depreciative asset requires a tailored strategy, balancing between cutting losses and extracting maximum utility.
It’s a strategic financial dance — knowing when to hold on and when to let go of depreciative assets can ensure they serve your bottom line more than they hurt it.
FAQs
Appreciating assets are financial powerhouses that grow your wealth over time. They combat inflation and can provide additional income streams.
By increasing in value, they enhance your net worth, creating a more robust financial foundation for your future endeavors.
Appreciating assets are typically categorized based on their nature and the way they generate value. Common categories include tangible assets like real estate and collectibles, financial assets like stocks and bonds, and intangible assets like patents and copyrights.
The assets that don’t often depreciate include real estate, precious metals like gold and silver, and certain collectibles such as fine art or vintage cars. These assets maintain value or appreciate over time, resistant to the typical wear and tear or technological obsolescence that affects other assets.
Which Asset that Has Appreciation in Value Interests You
In conclusion, adding appreciating assets to your portfolio is a strategic move towards achieving financial security and building long-term wealth.
These assets combat inflation by potentially increasing in value over time, providing an opportunity to earn returns that exceed the average inflation rate.
However, these assets are not considered to be part of your liquid net worth. With all appreciating assets, you must consider the potential taxes on your various investments.
To facilitate this wealth-building strategy, it’s vital to practice saving diligently—consider automating your savings, cutting unnecessary expenses, and increasing income streams. By consistently setting aside funds, you can gradually invest in diverse appreciating assets such as stocks, real estate, or retirement accounts.
This is how you start forming a life consistent with financial freedom.
Source
Barrons. “Rare Portrait of George Washington Could Fetch $2.5 Million at Auction.” https://www.barrons.com/articles/rare-portrait-of-george-washington-could-fetch-2-5-million-at-auction-e2f19134. Accessed February 20, 2024.
Los Angeles Times. “A $7.5-million find: Overlooked Getty estate sale map turns out to be 14th century treasure.” https://www.latimes.com/california/story/2023-10-25/map-dealer-discovers-14th-century-portolan-chart-getty-estate-sale. Accessed February 20, 2024.
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Stocks are shares of ownership in a company. To start investing in stocks, you would find a company that you like and think might grow in value and then purchase its stock through a brokerage account. If the stock price rises, you could sell your shares and potentially make a profit — or not if share prices decline.
Of course, when it comes to investing for beginners, you need to learn some basics to invest in stocks and do it well. Thanks to technology and various educational resources, you can get started using an app or online brokerage account and learn as you go. It has never been easier to build investing confidence as you gain experience. Here is a step-by-step guide for those who want to start investing in stocks now.
Key Points
• Stocks represent shares of ownership in a company and can be purchased through a brokerage account.
• Before investing in stocks, determine your investing approach and consider your time horizon.
• Different ways to invest in stocks include self-managed investing, using a financial advisor, or utilizing robo-advisors.
• The amount you invest in stocks depends on your budget and financial goals.
• Choose stocks based on thorough research, including analyzing a company’s financial statements and valuation metrics.
How to Start Investing in Stocks: 5 Steps
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1. Determine Your Investing Approach
Before you get started investing in stocks, you need to determine your investing approach. Because every person has unique financial goals and risk tolerances, there is no one-size-fits-all strategy to begin investing in the stock market.
Most people will need to decide whether they want a hands-on approach to investing or whether they’d like to outsource their wealth building to some sort of financial advisor.
Additionally, investors need to consider their time horizons before investing in stocks. Some investors want to invest long-term — buying and holding assets to build wealth for retirement. In contrast, other investors are more interested in short-term trading, buying and selling stocks daily or weekly to make a quick profit. The type of investor you want to be will help determine what kind of stocks you should buy and your investing approach.
The Different Ways to Invest in the Stock Market
Fortunately, various options are available for every type of investor as they begin to invest in stocks.
As mentioned above, some investors like to have a hands-on approach to investing. These investors want to make decisions on their own, picking what stocks are right for them and building a portfolio from the ground up. This self-managed strategy can be time-consuming but an excellent option for investors who have a general understanding of the markets or would like to learn more about them.
Other investors like to have experts, like a money manager, manage the investing process for them. While this investing approach may cost more than doing it yourself, it can be an ideal choice for individuals who do not have the time or energy to devote to financial decision-making.
2. Decide How Much you Will Invest in Stocks
How much you invest depends entirely on your budget and financial goals. Many financial experts recommend saving between 10% and 15% of your after-tax annual income, either in a savings account or by investing. With that guideline in mind, you may decide to invest with whatever you can comfortably afford.
Fortunately, it’s much easier to invest these days, even if you only have a few bucks at a time. Many brokerage firms offer low or no trading fees or commissions, so you can make stock trades without worrying about investment fees eating into the money you decide to invest.
Additionally, many brokerage firms offer fractional share investing, which allows investors to buy smaller amounts of a stock they like. Instead of purchasing one stock at the value for which the stock is currently trading — which could be $1,000 or more — fractional share investing makes it possible to buy a portion of one stock. Investors can utilize this to use whatever dollar amount they have available to purchase stocks.
For example, if you only have $50 available to invest and want to buy stock XYZ trading at $500 per share, fractional share investing allows you to buy 10% of XYZ for $50.
Asset Allocation
Asset allocation involves spreading your money across different types of investments, like stock, bonds, and cash, in order to balance risk and reward. Determining a portfolio’s asset allocation can vary from person to person, based on financial goals and risk tolerance.
Asset allocation is closely tied with portfolio diversification. Diversification means spreading one’s money across a range of assets. Generally, it’s like taking the age-old advice of not putting all your eggs in one basket. An investor can’t avoid risk entirely, but diversifying their investments can help mitigate the risk one asset class poses.
3. Open an Investment Account
Once you determine your investing approach and how much money you can invest, you’ll need to open a brokerage account to buy and sell shares of companies or whatever other assets you’d like to invest in.
Several investment accounts might make sense for you, depending on your comfort level in managing your investments and your long-term financial goals.
Professional option: Full-service brokerages
Many investors may use traditional brokerage firms, also known as full-service brokerages, to buy and sell stocks and other securities. A full-service brokerage offers additional services beyond just buying and selling stocks, such as investment advice, wealth management, and estate planning. Typically, full-service brokerages provide these services at high overall costs, while discount and online brokerages maintain scaled-down services with lower overall costs.
A full-service brokerage account may not be the best option for investors just getting started investing in stocks. These firms often require substantial account minimum balances to open an account. This option may be out of reach for most in the early stages of their investing journey.
Do-it-yourself option: Online brokerage
An online brokerage account is ideal for most beginning investors looking to have a hands-on approach to trading stocks and building a financial portfolio. Many online brokers offer services with the convenience of an app, which can make investing more streamlined. If you feel confident or curious about how to start investing at a lower cost than a full-service brokerage firm, opening an account with an online broker could be a great place to start.
Hands-off, automated option: Robo-advisor
If you’re interested in investing but want some help setting up a basic portfolio, opening an investment account with a robo-advisor might be best for you. A robo-advisor uses a sophisticated computer algorithm to help you pick and manage investments. These automated accounts generally don’t offer individual stocks; instead, they build a portfolio with a mix of exchange-traded funds (ETFs). Nonetheless, it’s a way to become more familiar with investing.
Retirement option: 401(k) and IRAs
Retirement accounts like employer-sponsored 401(k)s or individual retirement accounts (IRAs) are tax-advantaged investment accounts that can be great for the beginning investor trying to build a retirement nest egg. These accounts offer investors a range of investment choices, including individual stocks. You may also have access to tutorials, advisors, or other resources to help you learn how to start investing in these accounts.
💡 Ready to start retirement investing? Consider opening an IRA online.
Tip: Compare Costs and Features
No matter where you decide to open your investment account, be sure to research and compare costs and features within the account. For example, many brokerage accounts charge investment fees and commissions for making trades. Although investment costs can be quite low — and you can trade stocks without paying a commission — any investment fee can add up over time and ultimately reduce your overall investment returns.
Additionally, it helps to check if the investment account requires a minimum deposit to open an account. A minimum deposit can be a barrier to getting started for the beginning investor who doesn’t have much money to invest. However, many firms do not have minimum deposit requirements any longer.
4. Choose Your Stocks
Deciding what individual stocks to invest in can be challenging for most investors. There are countless ways to evaluate stocks before you buy.
Before choosing your stocks, you generally want to do a deep dive into a company’s inner workings to understand the company’s overall valuation and the stock’s share price.
As a beginning investor, you want to get comfortable reading a company’s balance sheet and other financial statements. All publicly-traded companies must file this information with the Securities and Exchange Commission (SEC), so you shouldn’t have trouble finding these financials.
One of the most fundamental metrics for understanding a stock’s value compared to company profits is its price-to-earnings (PE) ratio. Others include the price-to-sales (PS) ratio and the price/earnings-to-growth (PEG) ratio, which may be helpful for companies that have little to no profits but are expanding their businesses quickly.
These metrics, and other financial ratios, can help you determine what stocks to buy. And the advantage of owning individual stocks is that you can get direct exposure to a company you believe has the potential to grow based on your research. The downside, of course, is that investing doesn’t come with guarantees, and your stock’s value could decline even with thorough research.
💡 Recommended: 15 Technical Indicators for Stock Trading
5. Continue Building Your Portfolio
After you’ve decided what stocks to invest in, you generally want to continue building a portfolio that will help you meet your financial goals.
One way to bolster your portfolio is by buying mutual funds and ETFs rather than individual stocks. A benefit to investing in funds that hold stocks is that you can avoid some of the risks of being invested in individual stocks that may not perform well.
Whether investing in individual stocks or funds, you may want to consider the level of diversification in your portfolio that feels right for you. There is no consensus about the right way to diversify investments. For one person, ideal diversification could mean owning 20 stocks in different industries. For another, it could mean owning the “whole” market via a handful of mutual funds.
Once you get more comfortable investing in stocks and funds, you can employ numerous other investing strategies. You can add various securities, like bonds, commodities, and crypto, to your portfolio.
The Takeaway
Historically, investing in the stock market has been a way for some individuals to build personal wealth. These days, it’s never been easier for new investors considering getting into stocks to start. Whether you choose to work with a financial advisor or use an online broker or app, there are several ways to find a method that makes stock investing easy, fun, and potentially profitable. Of course, there are no guarantees, so it’s wise to take a step-by-step approach, start small if you prefer, do some research using the many resources available, and see what comes as you gain experience and confidence.
Investors can open an online investing account with SoFi Invest® to trade individual stocks, ETFs, or fractional shares with no commissions. Additionally, SoFi’s Automated Investing builds, manages, and rebalances portfolios with no SoFi management fee for those interested in investing in stocks through a more hands-off approach.
Start investing with your SoFi Invest account today.
FAQ
How do I invest $100?
You can invest $100 by opening an investing account that does not require a minimum account balance and purchasing shares of a stock or ETF that are less than $100. You can also use your funds to purchase fractional shares of whatever stocks you want to own.
How do I open a brokerage account?
You’ll need to take a few steps to open a brokerage account. First, you’ll need to find a broker that fits your needs. Once you’ve found a broker, you’ll need to complete an application and submit it to the broker. The broker will then review your application and, if approved, will open an account for you.
What is the S&P 500?
The Standard and Poor’s 500, commonly known as the S&P 500, is an American stock market index based on the market capitalizations of 500 large companies having common stock listed on the NYSE or NASDAQ stock exchanges. It is one of the most commonly followed stock market indices in the United States, along with the Dow Jones Industrial Average and Nasdaq Composite.
SoFi Invest® INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below:
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Average mortgage rates edged higher yesterday. Although the change was negligible, it was enough to return them to their recent high, first reached last Thursday. However, they’re still way lower than the near-8% levels seen as recently as last October.
Earlier this morning, markets were signaling that mortgage rates today might barely move. However, these early mini-trends often switch direction or speed as the hours pass.
Current mortgage and refinance rates
Find your lowest rate. Start here
Program
Mortgage Rate
APR*
Change
Conventional 30-year fixed
7.36%
7.37%
+0.01
Conventional 15-year fixed
6.76%
6.79%
Unchanged
Conventional 20-year fixed
7.06%
7.09%
Unchanged
Conventional 10-year fixed
6.65%
6.68%
-0.01
30-year fixed FHA
6.42%
7.11%
+0.03
30-year fixed VA
6.71%
6.83%
-0.01
5/1 ARM Conventional
6.18%
7.32%
-0.01
Rates are provided by our partner network, and may not reflect the market. Your rate might be different. Click here for a personalized rate quote. See our rate assumptions See our rate assumptions here.
Should you lock your mortgage rate today?
Many investors now expect the Federal Reserve to implement its first cut in general interest rates in June. And to make only three modest cuts during 2024.
That’s very different from their expectations at the start of this year. Then, they thought the first cut would be in March followed by five more before Dec. 31.
It’s this shift in expectations, from the optimistic to the realistic, that largely explains why mortgage rates have been moving higher in recent weeks. And it’s my top reason for now thinking that mortgage rates probably won’t begin to trend consistently lower until well into the second (April-June) quarter.
So, for now, my personal rate lock recommendations are:
LOCK if closing in 7 days
LOCK if closing in 15 days
LOCK if closing in 30 days
LOCK if closing in 45 days
LOCKif closing in 60days
However, with so much uncertainty at the moment, your instincts could easily turn out to be as good as mine — or better. So, let your gut and your own tolerance for risk help guide you.
>Related: 7 Tips to get the best refinance rate
Market data affecting today’s mortgage rates
Here’s a snapshot of the state of play this morning at about 9:50 a.m. (ET). The data are mostly compared with roughly the same time the business day before, so much of the movement will often have happened in the previous session. The numbers are:
The yield on 10-year Treasury notes held steady 4.30%. (Neutral for mortgage rates.) More than any other market, mortgage rates typically tend to follow these particular Treasury bond yields
Major stock indexes were falling this morning. (Good for mortgage rates.) When investors buy shares, they’re often selling bonds, which pushes those prices down and increases yields and mortgage rates. The opposite may happen when indexes are lower. But this is an imperfect relationship
Oil prices climbed to $79.34 from $78.19 a barrel. (Bad for mortgage rates*.) Energy prices play a prominent role in creating inflation and also point to future economic activity
Goldprices inched down to $2,042 from $2,044 an ounce. (Neutral for mortgage rates*.) It is generally better for rates when gold prices rise and worse when they fall. Gold tends to rise when investors worry about the economy.
CNN Business Fear & Greed index — increased to 79 from 76 out of 100. (Bad for mortgage rates.) “Greedy” investors push bond prices down (and interest rates up) as they leave the bond market and move into stocks, while “fearful” investors do the opposite. So lower readings are often better than higher ones
*A movement of less than $20 on gold prices or 40 cents on oil ones is a change of 1% or less. So we only count meaningful differences as good or bad for mortgage rates.
Caveats about markets and rates
Before the pandemic, post-pandemic upheavals, and war in Ukraine, you could look at the above figures and make a pretty good guess about what would happen to mortgage rates that day. But that’s no longer the case. We still make daily calls. And are usually right. But our record for accuracy won’t achieve its former high levels until things settle down.
So, use markets only as a rough guide. Because they have to be exceptionally strong or weak to rely on them. But, with that caveat, mortgage rates today look likely to hold steady or close to steady. However, be aware that “intraday swings” (when rates change speed or direction during the day) are a common feature right now.
Find your lowest rate. Start here
What’s driving mortgage rates today?
Today
This morning brought the second reading (of three) of gross domestic product (GDP) during the fourth quarter of last year. And it will likely hardly affect mortgage rates.
Today’s figure showed growth that quarter at 3.2%. Markets had been expecting it to be unchanged from its first reading at 3.3%. And they’d already priced that figure into mortgage rates.
Ten-year Treasury notes edged lower on the news. But mortgage rates didn’t immediately follow, and the difference between the actual figure and market expectations may not be enough to change them.
Tomorrow
We’re due January’s personal consumption expenditures (PCE) price index tomorrow. This is the Federal Reserve’s favorite gauge of inflation. So it certainly has the potential to move markets and mortgage rates, not least because it could influence decisions about the timing and scope of the Fed’s future cuts in general interest rates.
Tomorrow brings four key figures: two for the all-items PCE price index and two for the “core” PCE price index. The core figure is the all-items one after volatile food and energy prices have been stripped out, something that supposedly reveals underlying inflation. The Fed focuses on core figures.
There are two figures for each of these indexes. The first shows how prices moved in the month of January. And the second is the year-over-year (YOY) number, which shows how the same prices moved between Feb. 1, 2023 and Jan. 31, 2024.
Tomorrow’s inflation and other data
Here are what markets are expecting tomorrow (with December’s actual figures in brackets):
January all-items PCE price index — 0.3% (0.2 % in December)
January core PCE price index —0.4% (0.2% in December)
YOY all-items PCE price index — 2.4% (2.6 % in December)
YOY core PCE price index —2.8% (2.8% in December)
You can see that markets are expecting a small increase in most of these measures of inflation. And, because they’re expecting them, they’ll have already priced those into mortgage rates. So, if the figures come in as forecast, mortgage rates might barely move.
However, higher-than-expected figures could push those rates upward. Conversely, lower-than-expected ones could drag them downward.
Other economic reports due tomorrow rarely move mortgage rates far or for long, especially when they’re overshadowed by a major report like the PCE price index.
Ten senior Fed officials have speaking engagements tomorrow and on Friday, all after tomorrow’s report. And those could change mortgage rates if enough of them say things that cheer up or depress investors. But we can only wait to hear their remarks.
Don’t forget you can always learn more about what’s driving mortgage rates in the most recent weekend edition of this daily report. These provide a more detailed analysis of what’s happening. They are published each Saturday morning soon after 10 a.m. (ET) and include a preview of the following week.
Recent trends
According to Freddie Mac’s archives, the weekly all-time lowest rate for 30-year, fixed-rate mortgages was set on Jan. 7, 2021, when it stood at 2.65%. The weekly all-time high was 18.63% on Sep. 10, 1981.
Freddie’s Feb. 22 report put that same weekly average at 6.90% up from the previous week’s 6.77%. But note that Freddie’s data are almost always out of date by the time it announces its weekly figures.
Expert forecasts for mortgage rates
Looking further ahead, Fannie Mae and the Mortgage Bankers Association (MBA) each has a team of economists dedicated to monitoring and forecasting what will happen to the economy, the housing sector and mortgage rates.
And here are their rate forecasts for the four quarters of 2024 (Q1/24, Q2/24 Q3/24 and Q4/24).
The numbers in the table below are for 30-year, fixed-rate mortgages. Fannie’s were updated on Feb. 12 and the MBA’s on Feb. 20.
Forecaster
Q1/24
Q2/24
Q3/24
Q4/24
Fannie Mae
6.5%
6.3%
6.1%
5.9%
MBA
6.9%
6.6%
6.3%
6.1%
Of course, given so many unknowables, both these forecasts might be even more speculative than usual. And their past record for accuracy hasn’t been wildly impressive.
Important notes on today’s mortgage rates
Here are some things you need to know:
Typically, mortgage rates go up when the economy’s doing well and down when it’s in trouble. But there are exceptions. Read ‘How mortgage rates are determined and why you should care’
Only “top-tier” borrowers (with stellar credit scores, big down payments, and very healthy finances) get the ultralow mortgage rates you’ll see advertised
Lenders vary. Yours may or may not follow the crowd when it comes to daily rate movements — though they all usually follow the broader trend over time
When daily rate changes are small, some lenders will adjust closing costs and leave their rate cards the same
Refinance rates are typically close to those for purchases.
A lot is going on at the moment. And nobody can claim to know with certainty what will happen to mortgage rates in the coming hours, days, weeks or months.
Find your lowest mortgage rate today
You should comparison shop widely, no matter what sort of mortgage you want. Federal regulator the Consumer Financial Protection Bureau found in May 2023:
“Mortgage borrowers are paying around $100 a month more depending on which lender they choose, for the same type of loan and the same consumer characteristics (such as credit score and down payment).”
In other words, over the lifetime of a 30-year loan, homebuyers who don’t bother to get quotes from multiple lenders risk losing an average of $36,000. What could you do with that sort of money?
Verify your new rate
Mortgage rate methodology
The Mortgage Reports receives rates based on selected criteria from multiple lending partners each day. We arrive at an average rate and APR for each loan type to display in our chart. Because we average an array of rates, it gives you a better idea of what you might find in the marketplace. Furthermore, we average rates for the same loan types. For example, FHA fixed with FHA fixed. The end result is a good snapshot of daily rates and how they change over time.
How your mortgage interest rate is determined
Mortgage and refinance rates vary a lot depending on each borrower’s unique situation.
Factors that determine your mortgage interest rate include:
Overall strength of the economy — A strong economy usually means higher rates, while a weaker one can push current mortgage rates down to promote borrowing
Lender capacity — When a lender is very busy, it will increase rates to deter new business and give its loan officers some breathing room
Property type (condo, single-family, town house, etc.) — A primary residence, meaning a home you plan to live in full time, will have a lower interest rate. Investment properties, second homes, and vacation homes have higher mortgage rates
Loan-to-value ratio (determined by your down payment) — Your loan-to-value ratio (LTV) compares your loan amount to the value of the home. A lower LTV, meaning a bigger down payment, gets you a lower mortgage rate
Debt-To-Income ratio — This number compares your total monthly debts to your pretax income. The more debt you currently have, the less room you’ll have in your budget for a mortgage payment
Loan term — Loans with a shorter term (like a 15-year mortgage) typically have lower rates than a 30-year loan term
Borrower’s credit score — Typically the higher your credit score is, the lower your mortgage rate, and vice versa
Mortgage discount points — Borrowers have the option to buy discount points or ‘mortgage points’ at closing. These let you pay money upfront to lower your interest rate
Remember, every mortgage lender weighs these factors a little differently.
To find the best rate for your situation, you’ll want to get personalized estimates from a few different lenders.
Verify your new rate. Start here
Are refinance rates the same as mortgage rates?
Rates for a home purchase and mortgage refinance are often similar.
However, some lenders will charge more for a refinance under certain circumstances.
Typically when rates fall, homeowners rush to refinance. They see an opportunity to lock in a lower rate and payment for the rest of their loan.
This creates a tidal wave of new work for mortgage lenders.
Unfortunately, some lenders don’t have the capacity or crew to process a large number of refinance loan applications.
In this case, a lender might raise its rates to deter new business and give loan officers time to process loans currently in the pipeline.
Also, cashing out equity can result in a higher rate when refinancing.
Cash-out refinances pose a greater risk for mortgage lenders, so they’re often priced higher than new home purchases and rate-term refinances.
Check your refinance rates today. Start here
How to get the lowest mortgage or refinance rate
Since rates can vary, always shop around when buying a house or refinancing a mortgage.
Comparison shopping can potentially save thousands, even tens of thousands of dollars over the life of your loan.
Here are a few tips to keep in mind:
1. Get multiple quotes
Many borrowers make the mistake of accepting the first mortgage or refinance offer they receive.
Some simply go with the bank they use for checking and savings since that can seem easiest.
However, your bank might not offer the best mortgage deal for you. And if you’re refinancing, your financial situation may have changed enough that your current lender is no longer your best bet.
So get multiple quotes from at least three different lenders to find the right one for you.
2. Compare Loan Estimates
When shopping for a mortgage or refinance, lenders will provide a Loan Estimate that breaks down important costs associated with the loan.
You’ll want to read these Loan Estimates carefully and compare costs and fees line-by-line, including:
Interest rate
Annual percentage rate (APR)
Monthly mortgage payment
Loan origination fees
Rate lock fees
Closing costs
Remember, the lowest interest rate isn’t always the best deal.
Annual percentage rate (APR) can help you compare the ‘real’ cost of two loans. It estimates your total yearly cost including interest and fees.
Also, pay close attention to your closing costs.
Some lenders may bring their rates down by charging more upfront via discount points. These can add thousands to your out-of-pocket costs.
3. Negotiate your mortgage rate
You can also negotiate your mortgage rate to get a better deal.
Let’s say you get loan estimates from two lenders. Lender A offers the better rate, but you prefer your loan terms from Lender B. Talk to Lender B and see if they can beat the former’s pricing.
You might be surprised to find that a lender is willing to give you a lower interest rate in order to keep your business.
And if they’re not, keep shopping — there’s a good chance someone will.
Fixed-rate mortgage vs. adjustable-rate mortgage: Which is right for you?
Mortgage borrowers can choose between a fixed-rate mortgage and an adjustable-rate mortgage (ARM).
Fixed-rate mortgages (FRMs) have interest rates that never change unless you decide to refinance. This results in predictable monthly payments and stability over the life of your loan.
Adjustable-rate loans have a low interest rate that’s fixed for a set number of years (typically five or seven). After the initial fixed-rate period, the interest rate adjusts every year based on market conditions.
With each rate adjustment, a borrower’s mortgage rate can either increase, decrease, or stay the same. These loans are unpredictable since monthly payments can change each year.
Adjustable-rate mortgages are fitting for borrowers who expect to move before their first rate adjustment, or who can afford a higher future payment.
In most other cases, a fixed-rate mortgage is typically the safer and better choice.
Remember, if rates drop sharply, you are free to refinance and lock in a lower rate and payment later on.
How your credit score affects your mortgage rate
You don’t need a high credit score to qualify for a home purchase or refinance, but your credit score will affect your rate.
This is because credit history determines risk level.
Historically speaking, borrowers with higher credit scores are less likely to default on their mortgages, so they qualify for lower rates.
For the best rate, aim for a credit score of 720 or higher.
Mortgage programs that don’t require a high score include:
Conventional home loans — minimum 620 credit score
FHA loans — minimum 500 credit score (with a 10% down payment) or 580 (with a 3.5% down payment)
VA loans — no minimum credit score, but 620 is common
USDA loans — minimum 640 credit score
Ideally, you want to check your credit report and score at least 6 months before applying for a mortgage. This gives you time to sort out any errors and make sure your score is as high as possible.
If you’re ready to apply now, it’s still worth checking so you have a good idea of what loan programs you might qualify for and how your score will affect your rate.
You can get your credit report from AnnualCreditReport.com and your score from MyFico.com.
How big of a down payment do I need?
Nowadays, mortgage programs don’t require the conventional 20 percent down.
In fact, first-time home buyers put only 6 percent down on average.
Down payment minimums vary depending on the loan program. For example:
Conventional home loans require a down payment between 3% and 5%
FHA loans require 3.5% down
VA and USDA loans allow zero down payment
Jumbo loans typically require at least 5% to 10% down
Keep in mind, a higher down payment reduces your risk as a borrower and helps you negotiate a better mortgage rate.
If you are able to make a 20 percent down payment, you can avoid paying for mortgage insurance.
This is an added cost paid by the borrower, which protects their lender in case of default or foreclosure.
But a big down payment is not required.
For many people, it makes sense to make a smaller down payment in order to buy a house sooner and start building home equity.
Verify your new rate. Start here
Choosing the right type of home loan
No two mortgage loans are alike, so it’s important to know your options and choose the right type of mortgage.
The five main types of mortgages include:
Fixed-rate mortgage (FRM)
Your interest rate remains the same over the life of the loan. This is a good option for borrowers who expect to live in their homes long-term.
The most popular loan option is the 30-year mortgage, but 15- and 20-year terms are also commonly available.
Adjustable-rate mortgage (ARM)
Adjustable-rate loans have a fixed interest rate for the first few years. Then, your mortgage rate resets every year.
Your rate and payment can rise or fall annually depending on how the broader interest rate trends.
ARMs are ideal for borrowers who expect to move prior to their first rate adjustment (usually in 5 or 7 years).
For those who plan to stay in their home long-term, a fixed-rate mortgage is typically recommended.
Jumbo mortgage
A jumbo loan is a mortgage that exceeds the conforming loan limit set by Fannie Mae and Freddie Mac.
In 2023, the conforming loan limit is $726,200 in most areas.
Jumbo loans are perfect for borrowers who need a larger loan to purchase a high-priced property, especially in big cities with high real estate values.
FHA mortgage
A government loan backed by the Federal Housing Administration for low- to moderate-income borrowers. FHA loans feature low credit score and down payment requirements.
VA mortgage
A government loan backed by the Department of Veterans Affairs. To be eligible, you must be active-duty military, a veteran, a Reservist or National Guard service member, or an eligible spouse.
VA loans allow no down payment and have exceptionally low mortgage rates.
USDA mortgage
USDA loans are a government program backed by the U.S. Department of Agriculture. They offer a no-down-payment solution for borrowers who purchase real estate in an eligible rural area. To qualify, your income must be at or below the local median.
Bank statement loan
Borrowers can qualify for a mortgage without tax returns, using their personal or business bank account. This is an option for self-employed or seasonally-employed borrowers.
Portfolio/Non-QM loan
These are mortgages that lenders don’t sell on the secondary mortgage market. This gives lenders the flexibility to set their own guidelines.
Non-QM loans may have lower credit score requirements, or offer low-down-payment options without mortgage insurance.
Choosing the right mortgage lender
The lender or loan program that’s right for one person might not be right for another.
Explore your options and then pick a loan based on your credit score, down payment, and financial goals, as well as local home prices.
Whether you’re getting a mortgage for a home purchase or a refinance, always shop around and compare rates and terms.
Typically, it only takes a few hours to get quotes from multiple lenders — and it could save you thousands in the long run.
Time to make a move? Let us find the right mortgage for you
Current mortgage rates methodology
We receive current mortgage rates each day from a network of mortgage lenders that offer home purchase and refinance loans. Mortgage rates shown here are based on sample borrower profiles that vary by loan type. See our full loan assumptions here.
Roughly 72% of potential homebuyers say homeownership would be financially feasible if mortgage rates fell below 5%, according to a recent survey from Realtor.com. That means mortgage rates would need to drop by at least 2% to unlock today’s unaffordable housing market.
But there’s a problem. Major forecasts don’t call for mortgage rates to slip under 6% until 2025.
Between last November and early January, the average rate for a 30-year fixed mortgage, the most popular home loan type, fell from a high of 8.01% to the mid-6% range, according to Bankrate, CNET’s sister site. However, throughout February, rates have gone up and kept steady at around 7.25%.
Though mortgage rates aren’t expected to fall dramatically this year, any dip is good news for homebuyers. If home loan rates manage to reach the low-6% range by the end of the year, it would increase housing affordability for a large number of families who have been stuck on the sidelines.
Will 6% be the magic mortgage rate to kick-start the housing market? Or will we need to wait for 5% rates a year from now? Here’s what experts are saying.
Mortgage rates: Rise like a rocket, fall like a feather?
The recent surge in mortgage rates was fueled by hotter-than-expected inflation and labor data, which sent the 10-year Treasury yield (a key benchmark for the 30-year fixed mortgage rate) higher. But in some ways, rates were just recalibrating to an appropriate level.
“Investors got a little ahead of themselves in terms of expectations for lower rates this year,” said Keith Gumbinger, vice president of mortgage site HSH.com. Given the state of the economy — like sticky inflation and the Federal Reserve’s reactive monetary policy — financial markets may have been overly optimistic in projecting when interest rate cuts would start.
After nearly two years of aggressive interest rate hikes to tame inflationary pressures, the Fed signaled in December it would likely cut rates three times in 2024. Though the Fed doesn’t directly set mortgage rates, a lower federal funds rate, combined with cooler inflation, would help mortgage rates go down.
Overall forecasts still project mortgage rates to decline, but exactly when and by how much is murkier. Before adjusting the federal funds rate, the central bank wants to see inflation steady at its 2% year-over-year target.
Even if economic data points to a slowdown, mortgage rate movement will likely be slow and gradual, so 5% rates aren’t in the cards this year.
Read more: Mortgage Predictions: How Labor Data Could Impact Mortgage Rates in 2024
Will mortgage rates go below 6% this year?
Mortgage rates tend to be volatile and preemptive. Rate movement depends not on what’s happening now, but on what investors and lenders believe will happen in the future, according to Orphe Divounguy, senior economist at Zillow Home Loans.
“Today’s mortgage rates, to some extent, already reflect expectations of slowing economic growth and future Fed rate cuts,” Divounguy said.
While next month’s economic data could change the equation, expectations for mortgage rates haven’t changed much. Rates in the low-6% range are still possible in 2024, just not in time for the spring homebuying season.
What the experts are saying
“If we’ve learned anything over the past few years, it is that mortgage rates and other financial conditions can shift rapidly as conditions change. My base expectation is that mortgage rates will decline more gradually and not break below 6% in 2024.”
“As the Federal Reserve holds interest rates steady before beginning to slowly cut rates in May, the spread on the 30-year fixed-rate loan and the 10-year Treasury bond will normalize, and mortgage rates gradually will fall. That said, forecasting mortgage rates is challenging, and near-term volatility is likely. While the rate will trend lower, there is uncertainty in the month-to-month movement in rates.”
“A 6-8% range can be a possible outcome if inflation remains stickier and higher than expectations, and the Fed does not cut until much later than the second half of this year. If the soft landing scenario occurs, then we could see a range closer to 5-7% once the Fed starts to cut rates later in 2024.”
“I don’t think present conditions change the overall forecast for mortgage or other interest rates all that much, but sustained higher economic growth or more persistent inflation would.”
Is 6% an affordable mortgage rate?
Today’s mortgage rates feel high, even if they’re not in a broad historical sense.
Most prospective first-time homebuyers have witnessed low rates over the past decade, especially when they hit rock bottom in the 2% to 3% range during the pandemic. Current buyers likely weren’t on the market for a home in the 1980s, when rates peaked above 18%.
What’s considered an affordable mortgage rate depends on your financial situation. Broadly speaking, a good mortgage rate is generally at or below the national average. The median 30-year mortgage rate since 1971 is 7.4%, according to Freddie Mac.
For many homeowners, the mortgage rate they start with is only temporary: They refinance to a lower rate when mortgage rates drop.
Mortgage rates feel so high nowadays because of the housing market’s overall affordability crisis. Home prices keep rising, inflation is cutting into wages, and debt from credit cards and student loans continue to chip away at savings. All those factors combined have put homeownership out of reach for middle-income and low-income Americans.
Comparing 6% vs. 7% vs. 8% mortgage rate
If you’ve been waiting for rates to plummet before buying a home, doing some basic calculations might change your perspective. Yes, a 6% mortgage is higher than just four years ago. But it’s still a better deal than an 8% or even 7% mortgage rate.
What difference does 1% or 2% make?
Does a 1% drop in mortgage rates make a difference in your monthly payment? The answer is yes. What about a 2% drop? Even more.
Using CNET’s mortgage calculator, we did the math to demonstrate what a 1% or 2% difference can make on your home loan payment. In the chart above, we assumed a 20% down payment on a $500,000 home, making a total loan amount of $400,000 with a 30-year fixed term comparing a 6%, 7% and 8% rate.
Getting a home loan at a 6% interest rate versus a 7% rate gives you savings of $263 a month. That’s $3,156 a year and $94,683 in total interest over the life of your loan.
The savings are even bigger when comparing a 6% interest rate with an 8% rate: The lower rate saves you $537 per month, $6,444 per year and $193,267 in total interest paid.
Pro Tip: Even if you’re getting a lower interest rate, pay attention to lender fees and other costs. Excessive fees or mortgage “discount” points are often hidden and can offset the savings.
For example, a lender might advertise a below-average rate, let’s say 6%. But that’s often based on the borrower having an excellent credit score and paying discount points in exchange for that low rate, which can cost thousands of dollars upfront. Each mortgage discount point results in a 0.25% decrease in your rate but will typically cost 1% of the loan amount.
How to get a lower mortgage rate
While it’s important to keep track of current mortgage rate trends, the best thing to do is focus on doing things like improving your credit score, paying off debt and saving for a bigger down payment.
Many mortgage lenders advertise lower-than-average interest rates. But to qualify for those low rates, you’ll need to have excellent credit, a low debt-to-income ratio and (typically) a down payment of at least 20%.
Experts also recommend comparing loan offers from at least two different mortgage lenders to help you secure the best deal.
A secured credit card is a bit different than an unsecured credit card. It’s an unsecured card that most of us think of as a traditional credit card. The difference between a secured card and an unsecured card is that a secured card requires a security deposit to get. That deposit is either a down payment on your credit line or your entire credit line.
And because building credit requires having credit to use, secured credit cards are a fabulous way to fill the gap for those that don’t have a credit history or who’ve ended up with a bad or poor credit rating. And roughly 30% of Americans have bad credit or poor credit, which is almost 70 million people
And with poor credit, you can find it difficult or even impossible to get a car loan or mortgage. It can even make getting an apartment lease tough. And it can make getting a traditional credit card tough too. And even if you can get a loan, lease or credit card, your bad credit will cost you in higher interest rates and monthly payments.
There’s no instant cure for bad credit, but you can improve your score with work and careful planning. One of the ways you can improve that score is with a secured credit card.
Are you asking: “What is a secured credit card?” Keep reading for an explanation of what one is and how it can help build or rebuild your credit score and/or credit history.
What Is a Secured Credit Card?
Some credit card issuers offer secured credit cards. These cards are an option for those with less-than-perfect credit scores or no credit history. But, they have a catch. That catch is a required deposit.
OpenSky® Secured Visa® Credit Card
No credit check to apply. Zero credit risk to apply!
Looking to build or rebuild your credit? 2/3 of cardholders receive a 48+ point improvement after making 3 on-time payments
Extend your $200 credit line by getting considered for an unsecured credit line increase after 6 months, no additional deposit required!
Get free monthly access to your FICO score in our mobile application
Build your credit history across 3 major credit reporting agencies: Experian, Equifax, and Transunion
Add to your mobile wallet and make purchases using Apple Pay, Samsung Pay and Google Pay
Fund your card with a low $200 refundable security deposit to get a $200 credit line
Apply in less than 5 minutes with our mobile first application
Choose the due date that fits your schedule with flexible payment dates
Join over 1.2 million cardholders who’ve used OpenSky to build their credit
Need more credit?
When you apply for a secured credit card, the credit card issuer takes a refundable security deposit. That deposit gets you approved for the card and for a small credit line. The credit line is usually small like $200 or $500. But some cards offer higher credit lines—even up to $3,000.
With most secured cards, your security deposit is your credit limit. Your deposit acts as collateral against any payments you might miss and your poor or absent credit rating. Since your deposit equals your total credit limit in most cases, the issuer won’t lose money if you miss a payment.
Secured Vs. Unsecured Credit Cards
The other main form of credit card is an unsecured credit card. Credit card issuers don’t require a deposit when for traditional unsecured credit cards.
You can have a good credit score and still get turned down for an unsecured credit card based. For example, they may turn you down if your annual income isn’t high enough or if you have several other credit cards near their limit
Who Are Secured Credit Cards For?
Secured credit cards are intended for two types of cardholders:
Those who want and need to improve bad credit or poor credit scores
Those who need to start building on a limited or nonexistent credit history
Both of these types of cardholders are challenged with low credit scores.
If you fit into either of the above categories and as a result, you’re having trouble qualifying for a traditional credit card, secured credit cards could be a good solution.
Keep in mind that it’s still possible to be turned down for a secured credit card, particularly if you have a blemish like bankruptcy on your credit history.
How Secured Cards Help You Build Credit?
The major credit bureaus calculate your credit scores. They use many factors in modeling that score. While a secured card can’t fix all the issues that go into your score, like payment history, debt usage, credit history, account mix and credit inquiries, it can help you with most.
One of the big factors in your credit score is the percentage of on-time payments. The higher the percentage the better with 100% being ideal. Issuers that offer secured cards report your payments to the credit bureaus each month the same way they report unsecured credit card payments.
The best way to build your credit with a secured card is to use the card responsibly and make your monthly payments on time, every time. That way, you’ll build a positive payment history on your credit.
There are other ways to use your card to build your credit too.
The credit bureaus also look at how much of your credit you use—called debt usage. If you keep the balance on your secured card low, it helps boost your score. As a general rule, don’t use more than 30% of your credit limit if possible. Even better, use no more than 10%. Thirty percent of $500 is $150. Ten percent is $50. Following that guideline shows you can use credit wisely by not maxing out your card or cards.
Another factor credit bureaus look at is your account mix. You want a healthy mix of accounts. Long-term accounts increase your available credit limit, so they lower your debt usage. They also add to your account mix. Keeping your secured card—even if you’re not using it—is a good idea.
Note though, if you apply for too many credit cards, it can hurt your score. Each application puts a hard inquiry on your credit report. So, find one card and apply and only apply for another if you’re declined. Also, consider applying to cards that don’t check your credit history like the OpenSky® Secured Visa® Credit Card or one that prequalifies you with a credit check like the Merrick Bank Secured Credit Card.
Merrick Bank Secured Credit Card
Choose your own credit line based on how much money you want to put down as a security deposit.
Initial deposits can be from $200 to $3,000. You can increase your credit line at any time by adding additional money to your security deposit, up to $3,000.
After 9 months, we review your account for a credit line increase. No additional deposit required!
Secured Credit Cards are great for people looking to build or rebuild credit and are available to people with all kinds of credit backgrounds.
Unlike a debit card or a pre-paid card, it helps build your credit history. We report your payment history to all three major credit-reporting agencies.
Get your FICO® Credit Score for free each month.
Fraud coverage if your card is lost or stolen. Access your account 24 hours a day, 7 days a week. Get help staying on track with available Auto Pay and account alerts.
Card issued by Merrick Bank, Member FDIC.
Tips for Using a Secured Card Wisely
Getting a secured card is only the first step. You must use the card in a smart manner to get the most benefit from it.
You might find yourself tempted to put the card away and never use it. That approach provides limited value for your credit score. It just shows up on your credit report as available credit.
You want to use the credit, a little, to prove you can use it responsibly. One way you can do that is through occasional small purchases.
For example, you can buy a parent or sibling a small gift they need, such as a blender or microwave. Then you pay that off over the course of a few months or in full at the end of the month.
Pay for minor car maintenance with it, like an oil change. Most oil changes come in under $75, which makes it something you can reasonably pay off in a month or two. You also get something useful and necessary out of the deal.
Don’t use your card for impulse purchases. Your credit limit might cover the cost of a video game or new jacket you want. Give yourself a two-day cooling off period and then ask: “Is that the best use of my credit card?” In most instances, the answer is no. Those kinds of purchases eat up credit you might need for an emergency, without providing much value in return.
Is There a Downside to Secured Cards?
Secured cards can have higher interest rates—dubbed annual percentage rate or APR—than other credit lines, though APRs vary a lot from card to card. There are many secured cards that have better APRs than traditional credit cards—especially rewards credit cards that charge higher interest rates to make up for the rewards you earn.
For example, the Applied Bank® Secured Visa® Gold Preferred® Credit Card at publication time has an ongoing APR of just 9.99% Fixed and the First Progress Platinum Prestige Mastercard® Secured Credit Card an ongoing APR of 15.24% Variable APR for Purchases.
Like any credit card, secured credit cards may charge an annual fee. Fees tend to range from $29 to $50. But, like traditional credit cards, there are secured cards that have no annual fee.
If you’re dreaming of earning points or cash-back with a secured card, you’re out of luck. These cards don’t come with added perks outside of helping you build credit. But, if you use it right and do build your credit, you’ll be on your way to qualifying for a rewards credit card before you know it.
Always make sure you understand exactly what the company offers before you apply. That way you can get a card that better suits your situation.
Parting Thoughts on Secured Credit Cards
You can answer the question, what is a secured credit card, by saying it’s an opportunity to build your credit.
When you can’t get an unsecured credit card, it makes rebuilding your credit more difficult. A secured credit card lets you establish that you can use credit responsibly, make on-time payments and keep an account in good standing.
Credit.com helps consumers by providing practical information about getting and using credit. To help you track your quest for better credit, and to find out where you stand before applying for a new credit card, get your free Experian credit score, right here on Credit.com. Your score includes a free credit report card that helps you track where you stand on payment history, debt usage, credit history, account mix and credit inquiries and how you can improve each area.