Mortgage rates declined significantly over the past week, marking the eighth straight week of falling interest rates.
The 30-year fixed mortgage rate is 6.61% for the week ending December 28, 2023, according to data from Freddie Mac. This represents a decrease of -0.06% from a week ago.
The 15-year fixed rate mortgage stands at 5.93%. That’s 0.02% lower than a week prior. At that rate, you’ll pay $840 per month in principal and interest for every $100,000 you borrow.
The rate you’ll actually receive will vary based on the price of the home you’re buying, your credit history, and the size of the down payment you’re making. You can compare the offers below to find your best rate.
High interest rates are sticking around as central banks around the world, including the Fed, battle stubbornly high inflation with a series of aggressive interest rate hikes. These efforts to rein in prices have also slowed global economic growth and fueled recession fears.
Geopolitical tensions stemming from the ongoing war in Ukraine and conflict in the Middle East have further clouded the economic outlook.
As the Fed asserts that more rate hikes are likely needed to tame inflation, analysts expect mortgage rates will continue trending upward in the near term. This could place even more affordability pressure on the housing market, especially impacting first-time homebuyers.
Why shop around for mortgage rates?
Getting the lowest mortgage rate possible can save you tens of thousands of dollars over the lifetime of your home loan. With rates on the rise in 2023, it’s more important than ever to understand the factors impacting mortgage rates, strategically shop for the best deal, and meet lenders’ requirements to qualify for the lowest rate.
This guide will cover everything you need to know about today’s mortgage rates, from how they’re determined to where experts expect them to go in the months ahead.
What impacts mortgage rates
Mortgage rates tend to follow the direction of long-term government bond yields, especially the yield on 10-year Treasury notes. Here are some of the key factors that can influence fluctuations in these yields and mortgage rates:
Federal Reserve policy: When the Fed raises its benchmark federal funds rate, it often leads to higher borrowing costs across the economy, including mortgage rates. The Fed began aggressively hiking rates in 2022 to combat high inflation, causing mortgage rates to soar. Further Fed rate hikes are expected through 2023.
Economic growth and inflation: Strong economic growth and rising inflation generally lead to higher mortgage rates, while slower growth and disinflation place downward pressure on rates.
Geopolitical events: Global conflict or political turmoil often spur investors to move money into safe haven assets like Treasury bonds, lowering yields and mortgage rates.
Investor demand: Strong demand for mortgage-backed securities from investors leads to lower mortgage rates. When demand falls, rates tend to rise.
Employment trends: A strong job market can fuel economic growth and push rates higher. Conversely, weak hiring data or increased unemployment tend to cause lower yields and rates.
Housing market trends: When housing demand is high, rates tend to rise as lenders face increased demand for mortgages. But lower demand for homes often correlates with declining mortgage rates.
Tips for finding the lowest mortgage rate
When shopping for a home loan, following these tips can help ensure you lock in the lowest possible mortgage rate:
Check rates from multiple lenders: Rates vary by lender, so comparing quotes from several lenders ensures you don’t overpay. Online rate comparison sites can give you a quick overview of prevailing rates.
Improve your credit score: Work on raising your credit score to at least 740, which will qualify you for the best mortgage terms. Pay down debts, correct any errors on your credit reports, and avoid taking on new debt before applying for a mortgage.
Lower your debt-to-income ratio: Lenders look closely at your existing debts in relation to your income. Paying down credit cards and other debts before applying for a mortgage can help lower your DTI and qualify for better rates.
Make a sizable down payment: Down payments of 20% or more of the home’s purchase price result in the best mortgage rates and eliminate the need to pay private mortgage insurance.
Compare quotes for 15-year and 30-year terms: In general, 15-year mortgage rates are lower than those on 30-year mortgages. But the higher monthly payment on a 15-year loan may not fit your budget.
Lock in your rate: Rates fluctuate daily. Once you find the rate you want, lock it in by completing most of the mortgage application paperwork. This protects you if rates rise further before closing.
Minimum requirements for common mortgage types
Mortgage lenders weigh many factors when reviewing applications, but most have basic requirements borrowers must meet to qualify for certain loans. Here are typical minimum standards for popular mortgage types.
Mortgage rates over the past three years
Mortgage rates have seen significant fluctuations over the past few years:
2020: Historic lows due to the COVID-19 pandemic. The average 30-year fixed rate mortgage fell below 3% by the end of 2020.
2021: Rates remained very low early in 2021, then began to rise in the spring. By December 2021, rates returned to pre-pandemic levels around 3.5%.
2022: The Fed’s rate hikes and inflation drove mortgage rates dramatically higher throughout 2022. Rates soared above 7% in late 2022 from around 3% at the beginning of the year.
2023: Rates are projected to remain elevated in 2023 compared to the past decade. Further Fed rate hikes could push averages above 8%.
The chart below shows average rates for the 30-year and 15-year fixed rate mortgages over the past three years.
The takeaway is that mortgage rates shift constantly in response to economic or political factors. Staying informed and timing your purchase to lock in a lower rate can make a huge difference in how much home you can afford. Casting a wide net when shopping for lenders pretty much guarantees you’ll secure the most competitive rate on your loan.
Methodology
Mortgage rate data comes from Freddie Mac, a government-sponsored leader in the housing industry that tracks average mortgage rates. We considered average rates for both the 30-year fixed rate mortgage and 15-year fixed rate mortgage. Freddie Mac rates exclude additional fees and points.
Average rates are reported weekly on Thursdays and updated accordingly.
This article is not intended to be financial advice. Before making significant financial decisions, you can review your options with a financial advisor or credit counselor.
If you spent your teenage years waiting anxiously for one of your siblings to get out of the shower, the idea of selling your spacious, multi-bathroom home and moving into a smaller house or condo may feel like a reversal of fortune.
Yet for many retirees, downsizing makes financial and practical sense. Younger baby boomers — those currently ranging in age from 57 to 66 — made up 17% of recent home buyers, while older boomers — ages 67 to 75 — accounted for 12%, according to a 2022 report from the National Association of Realtors Research Group. Boomers’ primary reasons for buying a home were to be closer to friends and family, as well as a desire to move into a smaller home, the report said. Both younger and older boomers were more likely than others to purchase a home in a small town, and younger boomers were the most likely to buy in a rural area.
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For retirees Fred and Shelby Bivins, selling their home in Green Valley, Ariz., will enable them to realize their dream of traveling in retirement. The Bivinses have put their 2,050-square-foot Arizona home on the market and plan to relocate to their 1,600-square-foot summer condo in Fish Creek, Wis., a small community about 50 miles from Green Bay. They plan to live in Wisconsin in the spring and summer and spend the winter months in a short-term rental in Arizona, where they have family.
Fred, 65, says the decision to downsize was precipitated by a two-month stay in Portugal last year, one of several countries they hope to visit while they’re still healthy enough to travel. “We’ve had Australia and New Zealand on our list for many years, even when we were working,” says Shelby, 68. The Bivinses are also considering a return visit to Portugal. Eliminating the cost of maintaining their Arizona home will free up funds for those trips.
With help from Chris Troseth, a certified financial planner based in Plano, Texas, the Bivinses plan to invest the proceeds from the sale of their home in a low-risk portfolio. Once they’re done traveling and are ready to settle down, they intend to use that money to buy a smaller home in Arizona. “Selling their primary home will generate significant funds that can be reinvested to support their lifestyle now and in the future,” Troseth says. “Downsizing for this couple will be a positive on all fronts.”
Challenges for downsizers
For all of its appeal, downsizing in today’s market is more complicated than it was in the past. With 30-year fixed interest rates on mortgages recently approaching 8%, many younger homeowners who might otherwise upgrade to a larger home are unwilling to sell, particularly if it means giving up a mortgage with a fixed rate of 3% or less. More than 80% of consumers surveyed in September by housing finance giant Fannie Mae said they believe this is a bad time to buy a home and cited mortgage rates as the top reason for their pessimism. “This indicates to us that many homeowners are probably not eager to give up their ‘locked-in’ lower mortgage rates anytime soon,” Fannie Mae said in a statement. As a result, buyers are competing for limited stock of smaller homes, says Hannah Jones, senior economic research analyst for Realtor.com.
Here, though, many retirees have an advantage, Jones says. Rising rates have priced many younger buyers out of the market and made it more difficult for others to obtain approval for a loan. That’s not an issue for retirees who can use proceeds from the sale of their primary home to make an all-cash offer, which is often more attractive to sellers.
Retirees also have the ability to cast a wider net than younger buyers, whose choice of homes is often dictated by their jobs or a desire to live in a well-rated school district. While the U.S. median home price has soared more than 40% since the beginning of the pandemic, prices have risen more slowly in parts of the Northeast and Midwest, Jones says. “We have seen the popularity of Midwest markets grow over the last few months because out of all of the regions, the Midwest tends to be the most affordable,” she says. “You can still find affordable homes in areas that offer a lot of amenities.”
Meanwhile, selling your home may be somewhat more challenging than it was during the height of the pandemic, when potential buyers made offers on homes that weren’t even on the market. The Mortgage Bankers Association reported in October that mortgage purchase applications slowed to the lowest level since 1995, as the rapid rise in mortgage rates has pushed many potential buyers out of the market. Sales of previously owned single-family homes fell a seasonably adjusted 2% in September from August and were down 15.4% from a year earlier, according to the National Association of Realtors. “As has been the case throughout this year, limited inventory and low housing affordability continue to hamper home sales,” NAR chief economist Lawrence Yun said in a statement.
However, because of tight inventories, there’s still demand for homes of all sizes, Jones says, so if your home is well maintained and move-in ready, you shouldn’t have difficulty selling it. “The market isn’t as red-hot as it was during the pandemic, but there’s still a lot to be gained by selling now,” she says.
Other costs and considerations
If you live in an area where real estate values have soared, moving to a less expensive part of the country may seem like a logical way to lower your costs in retirement. While the median home price in the U.S. was $394,300 in September, there’s wide variation in individual markets, from $1.5 million in Santa Clara, Calif., to $237,000 in Davenport, Iowa. But before you up and move to a lower-cost locale, make sure you take inventory of your short- and long-term expenses, which could be higher than you expect.
Selling your current home, even at a significant profit, means you will incur costs, including those to update, repair and stage it, as well as a real estate agent’s commission (typically 5% to 6% of the sale price). In addition, ongoing costs for your new home will include homeowners insurance, property taxes, state and local taxes, and homeowners association or condo fees.
Nicholas Bunio, a certified financial planner in Berwyn, Pa., says one of his retired clients moved to Florida and purchased a home that was $100,000 less expensive than her home in New Jersey. Florida is also one of nine states without income tax, which makes it attractive to retirees looking to relocate. Once Bunio’s client got there, however, she discovered that she needed to spend $50,000 to install hurricane-proof windows. Worse, the only home-owners insurance she could find was through Citizens Property Insurance, the state-sponsored insurer of last resort, and she’ll pay about $8,000 a year for coverage. Her property taxes were higher than she expected, too. When it comes to lowering your cost of living after you downsize, “it’s not as simple as buying a cheaper house,” Bunio says
Before moving across the country, or even across the state, you should also research the availability of medical care. “Oftentimes, those considerations are secondary to things like proximity to family or leisure activities,” says John McGlothlin, a CFP in Austin, Texas. McGlothlin says one of his clients moved to a less expensive rural area that’s nowhere near a sizable medical facility. Although that’s not a problem now, he says, it could become a problem when they’re older.
If you use original Medicare, you won’t lose coverage if you move to another state. But if you’re enrolled in Medicare Advantage, which is offered by private insurers as an alternative to original Medicare, you may have to switch plans to avoid losing coverage. To research the availability of doctors, hospitals and nursing homes in a particular zip code, go to www.medicare.gov/care-compare.
At a time when many seniors suffer from loneliness and isolation, a sense of community matters, too. Bunio recounts the experience of a client who considered moving from Philadelphia to Phoenix after her daughter accepted a job there. The cost of living in Phoenix is lower, but the client changed her mind after visiting her daughter for a few months. “She has no friends in Phoenix,” he says. “She’s going on 61 and doesn’t want to restart life and make brand-new connections all over again.”
Time is on your side
Unlike younger home buyers, who may be under pressure to buy a place before starting a new job or enrolling their kids in school, downsizers usually have plenty of time to consider their options and research potential downsizing destinations. Once you’ve settled on a community, consider renting for a few months to get a feel for the area and a better idea of how much it will cost to live there. Bunio says some of his clients who are behind on saving for retirement or have high health care costs have sold their homes, invested the proceeds and become permanent renters. This strategy frees them from property taxes, homeowners insurance, homeowners association fees and other expenses associated with homeownership
The boom in housing values has boosted rental costs, as the shortage of affordable housing increased demand for rental properties. But thanks to the construction of new rental properties in several markets, the market has softened in recent months, according to Zumper, an online marketplace for renters and landlords. A Zumper survey conducted in October found that the median rent for a one-bedroom apartment fell 0.4% from September, the most significant monthly decline this year.
In 75 of the 100 cities Zumper surveyed, the median rent for a one-bedroom apartment was flat or down from the previous month. (For more on the advantages of renting in retirement, see “8 Great Places to Retire—for Renters,” Aug.)
Aging in place
Even if you opt to age in place, you can tap your home equity by taking out a home equity line of credit, a home equity loan or a reverse mortgage. At a time when interest rates on home equity lines of credit and loans average around 9%, a reverse mortgage may be a more appealing option for retirees. With a reverse mortgage, you can convert your home equity into a lump sum, monthly payments or a line of credit. You don’t have to make principal or interest payments on the loan for as long as you remain in the home.
To be eligible for a government-insured home equity conversion mortgage (HECM), you must be at least 62 years old and have at least 50% equity in your home, and the home must be your primary residence. The maximum payout for which you’ll qualify depends on your age (the older you are, the more you’ll be eligible to borrow), interest rates and the appraised value of your home. In 2024, the maximum you could borrow was $1,149,825.
There’s no restriction on how homeowners must spend funds from a reverse mortgage, so you can use the money for a variety of purposes, including making your home more accessible, generating additional retirement income or paying for long-term care. You can estimate the value of a reverse mortgage on your home at www.reversemortgage.org/about/reverse-mortgage-calculator.
Up-front costs for a reverse mortgage are high, including up to $6,000 in fees to the lender, 2% of the mortgage amount for mortgage insurance, and other fees. You can roll these costs into the loan, but that will reduce your proceeds. For that reason, if you’re considering a move within the next five years, it’s usually not a good idea to take out a reverse mortgage.
Another drawback: When interest rates rise, the amount of money available from a reverse mortgage declines. Unless you need the money now, it may make sense to postpone taking out a reverse mortgage until the Federal Reserve cuts short-term interest rates, which is unlikely to happen until late 2024 (unless the economy falls into recession before that). Even if interest rates decline, they aren’t expected to return to the rock-bottom levels seen over the past 15 years, according to a forecast by The Kiplinger Letter. And with inflation still a concern, big rate cuts such as those seen in response to recessions and financial crises over the past two decades are unlikely.
Note: This item first appeared in Kiplinger’s Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.
Mortgage interest rates are mixed over the past week, with the 30-year fixed rate declining for the seventh straight week and the 15-year fixed rate rising marginally.
The 30-year fixed mortgage rate is 6.95% for the week ending December 14, 2023, according to data from Freddie Mac. This represents a decrease of -0.08% from a week ago.
The 15-year fixed rate mortgage stands at 6.38%. That’s 0.09% higher than a week prior. At that rate, you’ll pay $865 per month in principal and interest for every $100,000 you borrow.
The rate you’ll actually receive will vary based on the price of the home you’re buying, your credit history, and the size of the down payment you’re making. You can compare the offers below to find your best rate.
High interest rates are sticking around as central banks around the world, including the Fed, battle stubbornly high inflation with a series of aggressive interest rate hikes. These efforts to rein in prices have also slowed global economic growth and fueled recession fears.
Geopolitical tensions stemming from the ongoing war in Ukraine and conflict in the Middle East have further clouded the economic outlook.
As the Fed asserts that more rate hikes are likely needed to tame inflation, analysts expect mortgage rates will continue trending upward in the near term. This could place even more affordability pressure on the housing market, especially impacting first-time homebuyers.
Why shop around for mortgage rates?
Getting the lowest mortgage rate possible can save you tens of thousands of dollars over the lifetime of your home loan. With rates on the rise in 2023, it’s more important than ever to understand the factors impacting mortgage rates, strategically shop for the best deal, and meet lenders’ requirements to qualify for the lowest rate.
This guide will cover everything you need to know about today’s mortgage rates, from how they’re determined to where experts expect them to go in the months ahead.
What impacts mortgage rates
Mortgage rates tend to follow the direction of long-term government bond yields, especially the yield on 10-year Treasury notes. Here are some of the key factors that can influence fluctuations in these yields and mortgage rates:
Federal Reserve policy: When the Fed raises its benchmark federal funds rate, it often leads to higher borrowing costs across the economy, including mortgage rates. The Fed began aggressively hiking rates in 2022 to combat high inflation, causing mortgage rates to soar. Further Fed rate hikes are expected through 2023.
Economic growth and inflation: Strong economic growth and rising inflation generally lead to higher mortgage rates, while slower growth and disinflation place downward pressure on rates.
Geopolitical events: Global conflict or political turmoil often spur investors to move money into safe haven assets like Treasury bonds, lowering yields and mortgage rates.
Investor demand: Strong demand for mortgage-backed securities from investors leads to lower mortgage rates. When demand falls, rates tend to rise.
Employment trends: A strong job market can fuel economic growth and push rates higher. Conversely, weak hiring data or increased unemployment tend to cause lower yields and rates.
Housing market trends: When housing demand is high, rates tend to rise as lenders face increased demand for mortgages. But lower demand for homes often correlates with declining mortgage rates.
Tips for finding the lowest mortgage rate
When shopping for a home loan, following these tips can help ensure you lock in the lowest possible mortgage rate:
Check rates from multiple lenders: Rates vary by lender, so comparing quotes from several lenders ensures you don’t overpay. Online rate comparison sites can give you a quick overview of prevailing rates.
Improve your credit score: Work on raising your credit score to at least 740, which will qualify you for the best mortgage terms. Pay down debts, correct any errors on your credit reports, and avoid taking on new debt before applying for a mortgage.
Lower your debt-to-income ratio: Lenders look closely at your existing debts in relation to your income. Paying down credit cards and other debts before applying for a mortgage can help lower your DTI and qualify for better rates.
Make a sizable down payment: Down payments of 20% or more of the home’s purchase price result in the best mortgage rates and eliminate the need to pay private mortgage insurance.
Compare quotes for 15-year and 30-year terms: In general, 15-year mortgage rates are lower than those on 30-year mortgages. But the higher monthly payment on a 15-year loan may not fit your budget.
Lock in your rate: Rates fluctuate daily. Once you find the rate you want, lock it in by completing most of the mortgage application paperwork. This protects you if rates rise further before closing.
Minimum requirements for common mortgage types
Mortgage lenders weigh many factors when reviewing applications, but most have basic requirements borrowers must meet to qualify for certain loans. Here are typical minimum standards for popular mortgage types.
Mortgage rates over the past three years
Mortgage rates have seen significant fluctuations over the past few years:
2020: Historic lows due to the COVID-19 pandemic. The average 30-year fixed rate mortgage fell below 3% by the end of 2020.
2021: Rates remained very low early in 2021, then began to rise in the spring. By December 2021, rates returned to pre-pandemic levels around 3.5%.
2022: The Fed’s rate hikes and inflation drove mortgage rates dramatically higher throughout 2022. Rates soared above 7% in late 2022 from around 3% at the beginning of the year.
2023: Rates are projected to remain elevated in 2023 compared to the past decade. Further Fed rate hikes could push averages above 8%.
The chart below shows average rates for the 30-year and 15-year fixed rate mortgages over the past three years.
The takeaway is that mortgage rates shift constantly in response to economic or political factors. Staying informed and timing your purchase to lock in a lower rate can make a huge difference in how much home you can afford. Casting a wide net when shopping for lenders pretty much guarantees you’ll secure the most competitive rate on your loan.
Methodology
Mortgage rate data comes from Freddie Mac, a government-sponsored leader in the housing industry that tracks average mortgage rates. We considered average rates for both the 30-year fixed rate mortgage and 15-year fixed rate mortgage. Freddie Mac rates exclude additional fees and points.
Average rates are reported weekly on Thursdays and updated accordingly.
This article is not intended to be financial advice. Before making significant financial decisions, you can review your options with a financial advisor or credit counselor.
Mortgage interest rates are down over the past week, marking the sixth straight week of rates decreasing. This decline is promising for prospective homebuyers, though interest rates lowering more will depend on Federal Reserve decisions and other economic factors.
The 30-year fixed mortgage rate is 7.03% for the week ending December 7, 2023, according to data from Freddie Mac. This represents a decrease of -0.19% from a week ago.
The 15-year fixed rate mortgage stands at 6.29%. That’s -0.27% lower than a week prior. At that rate, you’ll pay $860 per month in principal and interest for every $100,000 you borrow.
The rate you’ll actually receive will vary based on the price of the home you’re buying, your credit history, and the size of the down payment you’re making. You can compare the offers below to find your best rate.
High interest rates are sticking around as central banks around the world, including the Fed, battle stubbornly high inflation with a series of aggressive interest rate hikes. These efforts to rein in prices have also slowed global economic growth and fueled recession fears.
Geopolitical tensions stemming from the ongoing war in Ukraine and conflict in the Middle East have further clouded the economic outlook.
As the Fed asserts that more rate hikes are likely needed to tame inflation, analysts expect mortgage rates will continue trending upward in the near term. This could place even more affordability pressure on the housing market, especially impacting first-time homebuyers.
Why shop around for mortgage rates?
Getting the lowest mortgage rate possible can save you tens of thousands of dollars over the lifetime of your home loan. With rates on the rise in 2023, it’s more important than ever to understand the factors impacting mortgage rates, strategically shop for the best deal, and meet lenders’ requirements to qualify for the lowest rate.
This guide will cover everything you need to know about today’s mortgage rates, from how they’re determined to where experts expect them to go in the months ahead.
What impacts mortgage rates
Mortgage rates tend to follow the direction of long-term government bond yields, especially the yield on 10-year Treasury notes. Here are some of the key factors that can influence fluctuations in these yields and mortgage rates:
Federal Reserve policy: When the Fed raises its benchmark federal funds rate, it often leads to higher borrowing costs across the economy, including mortgage rates. The Fed began aggressively hiking rates in 2022 to combat high inflation, causing mortgage rates to soar. Further Fed rate hikes are expected through 2023.
Economic growth and inflation: Strong economic growth and rising inflation generally lead to higher mortgage rates, while slower growth and disinflation place downward pressure on rates.
Geopolitical events: Global conflict or political turmoil often spur investors to move money into safe haven assets like Treasury bonds, lowering yields and mortgage rates.
Investor demand: Strong demand for mortgage-backed securities from investors leads to lower mortgage rates. When demand falls, rates tend to rise.
Employment trends: A strong job market can fuel economic growth and push rates higher. Conversely, weak hiring data or increased unemployment tend to cause lower yields and rates.
Housing market trends: When housing demand is high, rates tend to rise as lenders face increased demand for mortgages. But lower demand for homes often correlates with declining mortgage rates.
Tips for finding the lowest mortgage rate
When shopping for a home loan, following these tips can help ensure you lock in the lowest possible mortgage rate:
Check rates from multiple lenders: Rates vary by lender, so comparing quotes from several lenders ensures you don’t overpay. Online rate comparison sites can give you a quick overview of prevailing rates.
Improve your credit score: Work on raising your credit score to at least 740, which will qualify you for the best mortgage terms. Pay down debts, correct any errors on your credit reports, and avoid taking on new debt before applying for a mortgage.
Lower your debt-to-income ratio: Lenders look closely at your existing debts in relation to your income. Paying down credit cards and other debts before applying for a mortgage can help lower your DTI and qualify for better rates.
Make a sizable down payment: Down payments of 20% or more of the home’s purchase price result in the best mortgage rates and eliminate the need to pay private mortgage insurance.
Compare quotes for 15-year and 30-year terms: In general, 15-year mortgage rates are lower than those on 30-year mortgages. But the higher monthly payment on a 15-year loan may not fit your budget.
Lock in your rate: Rates fluctuate daily. Once you find the rate you want, lock it in by completing most of the mortgage application paperwork. This protects you if rates rise further before closing.
Minimum requirements for common mortgage types
Mortgage lenders weigh many factors when reviewing applications, but most have basic requirements borrowers must meet to qualify for certain loans. Here are typical minimum standards for popular mortgage types.
Mortgage rates over the past three years
Mortgage rates have seen significant fluctuations over the past few years:
2020: Historic lows due to the COVID-19 pandemic. The average 30-year fixed rate mortgage fell below 3% by the end of 2020.
2021: Rates remained very low early in 2021, then began to rise in the spring. By December 2021, rates returned to pre-pandemic levels around 3.5%.
2022: The Fed’s rate hikes and inflation drove mortgage rates dramatically higher throughout 2022. Rates soared above 7% in late 2022 from around 3% at the beginning of the year.
2023: Rates are projected to remain elevated in 2023 compared to the past decade. Further Fed rate hikes could push averages above 8%.
The chart below shows average rates for the 30-year and 15-year fixed rate mortgages over the past three years.
The takeaway is that mortgage rates shift constantly in response to economic or political factors. Staying informed and timing your purchase to lock in a lower rate can make a huge difference in how much home you can afford. Casting a wide net when shopping for lenders pretty much guarantees you’ll secure the most competitive rate on your loan.
Methodology
Mortgage rate data comes from Freddie Mac, a government-sponsored leader in the housing industry that tracks average mortgage rates. We considered average rates for both the 30-year fixed rate mortgage and 15-year fixed rate mortgage. Freddie Mac rates exclude additional fees and points.
Average rates are reported weekly on Thursdays and updated accordingly.
This article is not intended to be financial advice. Before making significant financial decisions, you can review your options with a financial advisor or credit counselor.
Mortgage interest rates are down over the past week, marking the sixth straight week of rates decreasing. This decline is promising for prospective homebuyers, though interest rates lowering more will depend on Federal Reserve decisions and other economic factors.
The 30-year fixed mortgage rate is 7.03% for the week ending December 7, 2023, according to data from Freddie Mac. This represents a decrease of -0.19% from a week ago.
The 15-year fixed rate mortgage stands at 6.29%. That’s -0.27% lower than a week prior. At that rate, you’ll pay $860 per month in principal and interest for every $100,000 you borrow.
The rate you’ll actually receive will vary based on the price of the home you’re buying, your credit history, and the size of the down payment you’re making. You can compare the offers below to find your best rate.
High interest rates are sticking around as central banks around the world, including the Fed, battle stubbornly high inflation with a series of aggressive interest rate hikes. These efforts to rein in prices have also slowed global economic growth and fueled recession fears.
Geopolitical tensions stemming from the ongoing war in Ukraine and conflict in the Middle East have further clouded the economic outlook.
As the Fed asserts that more rate hikes are likely needed to tame inflation, analysts expect mortgage rates will continue trending upward in the near term. This could place even more affordability pressure on the housing market, especially impacting first-time homebuyers.
Why shop around for mortgage rates?
Getting the lowest mortgage rate possible can save you tens of thousands of dollars over the lifetime of your home loan. With rates on the rise in 2023, it’s more important than ever to understand the factors impacting mortgage rates, strategically shop for the best deal, and meet lenders’ requirements to qualify for the lowest rate.
This guide will cover everything you need to know about today’s mortgage rates, from how they’re determined to where experts expect them to go in the months ahead.
What impacts mortgage rates
Mortgage rates tend to follow the direction of long-term government bond yields, especially the yield on 10-year Treasury notes. Here are some of the key factors that can influence fluctuations in these yields and mortgage rates:
Federal Reserve policy: When the Fed raises its benchmark federal funds rate, it often leads to higher borrowing costs across the economy, including mortgage rates. The Fed began aggressively hiking rates in 2022 to combat high inflation, causing mortgage rates to soar. Further Fed rate hikes are expected through 2023.
Economic growth and inflation: Strong economic growth and rising inflation generally lead to higher mortgage rates, while slower growth and disinflation place downward pressure on rates.
Geopolitical events: Global conflict or political turmoil often spur investors to move money into safe haven assets like Treasury bonds, lowering yields and mortgage rates.
Investor demand: Strong demand for mortgage-backed securities from investors leads to lower mortgage rates. When demand falls, rates tend to rise.
Employment trends: A strong job market can fuel economic growth and push rates higher. Conversely, weak hiring data or increased unemployment tend to cause lower yields and rates.
Housing market trends: When housing demand is high, rates tend to rise as lenders face increased demand for mortgages. But lower demand for homes often correlates with declining mortgage rates.
Tips for finding the lowest mortgage rate
When shopping for a home loan, following these tips can help ensure you lock in the lowest possible mortgage rate:
Check rates from multiple lenders: Rates vary by lender, so comparing quotes from several lenders ensures you don’t overpay. Online rate comparison sites can give you a quick overview of prevailing rates.
Improve your credit score: Work on raising your credit score to at least 740, which will qualify you for the best mortgage terms. Pay down debts, correct any errors on your credit reports, and avoid taking on new debt before applying for a mortgage.
Lower your debt-to-income ratio: Lenders look closely at your existing debts in relation to your income. Paying down credit cards and other debts before applying for a mortgage can help lower your DTI and qualify for better rates.
Make a sizable down payment: Down payments of 20% or more of the home’s purchase price result in the best mortgage rates and eliminate the need to pay private mortgage insurance.
Compare quotes for 15-year and 30-year terms: In general, 15-year mortgage rates are lower than those on 30-year mortgages. But the higher monthly payment on a 15-year loan may not fit your budget.
Lock in your rate: Rates fluctuate daily. Once you find the rate you want, lock it in by completing most of the mortgage application paperwork. This protects you if rates rise further before closing.
Minimum requirements for common mortgage types
Mortgage lenders weigh many factors when reviewing applications, but most have basic requirements borrowers must meet to qualify for certain loans. Here are typical minimum standards for popular mortgage types.
Mortgage rates over the past three years
Mortgage rates have seen significant fluctuations over the past few years:
2020: Historic lows due to the COVID-19 pandemic. The average 30-year fixed rate mortgage fell below 3% by the end of 2020.
2021: Rates remained very low early in 2021, then began to rise in the spring. By December 2021, rates returned to pre-pandemic levels around 3.5%.
2022: The Fed’s rate hikes and inflation drove mortgage rates dramatically higher throughout 2022. Rates soared above 7% in late 2022 from around 3% at the beginning of the year.
2023: Rates are projected to remain elevated in 2023 compared to the past decade. Further Fed rate hikes could push averages above 8%.
The chart below shows average rates for the 30-year and 15-year fixed rate mortgages over the past three years.
The takeaway is that mortgage rates shift constantly in response to economic or political factors. Staying informed and timing your purchase to lock in a lower rate can make a huge difference in how much home you can afford. Casting a wide net when shopping for lenders pretty much guarantees you’ll secure the most competitive rate on your loan.
Methodology
Mortgage rate data comes from Freddie Mac, a government-sponsored leader in the housing industry that tracks average mortgage rates. We considered average rates for both the 30-year fixed rate mortgage and 15-year fixed rate mortgage. Freddie Mac rates exclude additional fees and points.
Average rates are reported weekly on Thursdays and updated accordingly.
This article is not intended to be financial advice. Before making significant financial decisions, you can review your options with a financial advisor or credit counselor.
The delinquency rate for mortgages on one-to-four unit residential properties climbed to 5.82 percent of all outstanding loans in the fourth quarter on a seasonally adjusted basis, up 0.87 percent from the same period a year ago and 35 basis points from the third quarter, the Mortgage Bankers Association said today.
The MBA’s National Delinquency Survey also found that 2.04 percent of outstanding loans were in the foreclosure process, up 0.85 percent from a year ago and 0.35 percent from the third quarter.
That marked an all-time high, while the total delinquency rate reached its highest point since 1985.
The survey revealed that the mortgage crisis is all encompassing, and not just a subprime issue, but rather an adjustable-rate mortgage crisis.
Since the fourth quarter of 2006, foreclosure starts on prime ARMS increased to 1.06 percent from 0.41 percent, while foreclosures tied to subprime ARMS rose to 5.29 percent from 2.70 percent.
Conversely, foreclosure starts tied to prime fixed mortgages rose just six basis points to 0.22 percent over the last year, while subprime fixed loans experienced a foreclosure start rate of just 1.52 percent, up from 1.09 percent a year ago.
The MBA also found that 42 percent of foreclosures started during the fourth quarter were tied to subprime ARMs, despite the fact that these loans only account for seven percent of all loans outstanding.
Prime ARMs represented 15 percent of the loans outstanding in the fourth quarter, but accounted for just 20 percent of the foreclosures started.
Much of the foreclosure activity was in hotbeds like California and Florida, two states that held 21 percent of all loans outstanding, but accounted for 30 percent of all foreclosure starts in the U.S.
The rate of foreclosure starts in Florida more than tripled over the last year, while more than doubling in California.
“Declining home prices are clearly the driving factor behind foreclosures, but the reasons and magnitude of the declines differ from state to state,” said Doug Duncan, MBA’s Chief Economist and Senior Vice President of Research and Business Development.
“In states like Ohio and Michigan, declines in the demand for homes due to job losses and out-migration have left those looking to sell the homes with fewer potential buyers, particularly with the much tighter credit restrictions borrowers now face. In states like California, Florida, Nevada and Arizona, overbuilding of new homes created a surplus that will take some time to work through.
During the fourth quarter, the seriously delinquent rate (90 days or more past due) increased for all loan types from the third quarter.
The rate increased 36 basis points for prime loans (from 1.31 percent to 1.67 percent), 306 basis points for subprime loans (from 11.38 to 14.44 percent), 46 basis points for FHA loans (from 5.54 percent to 6 percent) and 27 basis points for VA loans (from 2.56 to 2.83 percent).
Home loan borrowers, who were hoping to get some reprieve from high interest rate, are in for another disappointment. The Reserve Bank of India (RBI) has yet again decided to hold the repo rate, which has diminished the hope for any meaningful reduction in home loan interest rate in the near future. How long will the borrowers have to wait to see a fall in interest rate? What is the best way to manage a home loan in the current high interest rate regimen?
Home loan borrowers, especially the ones who took a home loan before May 2022, are going through one of the most difficult times. This is because the RBI raised the repo rate by 2.5% from May 2022 to February 2023. All floating rate home loans are now linked to an external benchmark and the repo rate is the benchmark for most such home loans. So, if the repo rate goes up, the interest rate of these home loans also go up by a similar quantum.
A 2.5% hike pushes EMIs up by 20% and total interest up by 44% Due to the steep rise in repo rate, these borrowers have seen an unprecedented increase in their home loan tenure or a steep hike in their home loan EMIs. For instance, on a Rs 50-lakh home loan taken for a tenure of 20 years, if you have to pay a higher interest rate of 9.5% instead of 7%, then your EMI goes up by 20% from Rs 23,259 to Rs 27,964. The impact on total interest payment during the tenure of the loan is overwhelmingly high as it goes up by 43.73% from Rs 25.82 lakh to Rs 37.11 lakh.
This kind of an adverse impact can jolt any borrower. The best remedy they can get against this hike is to see a similar rate reduction soon, but that is highly unlikely to happen. However, even a smaller reduction in interest rate can bring great relief. So what are the chances that the interest rate on these home loans will fall in the near future?
Will the interest rates fall any time soon?
The biggest relief home loan borrowers want is to see a significant fall in the interest rates so that their EMI burden comes down. So let us understand the likelihood of the interest rates coming down in the near future.Elevated inflation may not allow rates to fall soon The RBI has the primary responsibility to keep retail inflation in the range of 2-6%. If inflation remains above this range for a considerable period, the RBI is often compelled to go for a repo rate hike. So the direction of inflation is the most prominent factor that will determine the movement of the interest rate. Crude oil prices are one of the biggest drivers of inflation worldwide. From below $75 per barrel in June this year, Brent crude oil prices have gone up to over $90 per barrel. Therefore, a spike in inflation cannot be entirely ruled out. If inflation rises sharply, the central bank may have to go for a repo rate hike.
Upasna Bhardwaj, Chief Economist, Kotak Mahindra Bank, says the US dollar and bond yields have been on an uptrend. “Narrowing interest rate differentials to record low levels poses severe financial instability, thereby warranting a cautious approach by the RBI,” she says. Any action to reduce the rate will further reduce this differential and may put more pressure on the USD exchange rate, which the RBI would like to avoid.
However, the possibility of higher interest rates on short-term FDs cannot be ruled out. “We expect the RBI to prefer keeping the short-term rates elevated in the near term by using liquidity tools, given the pressure on INR and the underlying inflationary risks,” says Bhardwaj.
“We see cautious optimism in the governor’s speech. It suggests that things are difficult right now. But interest rates and inflation are on the right trajectory with limited upside risks, and the central bank will continue to manage growth expectations using all the tools of monetary policy,” says Adhil Shetty, CEO, Bankbazaar.com.
Another prominent indicator of the direction of the interest rates is the yield of the 10-year G-sec. Yield of the 10-year government bond, which had fallen below 7% in May, has risen above 7.2%. It indicates a rising trend in interest rate.
Another prominent factor that decides the interest rate’s direction is liquidity in the banking system. A tight liquidity situation pushes up the interest rates, especially on FDs with short tenures. “Liquidity conditions have tightened and borrowing costs have remained elevated since the last policy,” says a report published by CareEdge, a credit rating company. What it reaffirms is that the possibility of any reduction in interest rates is highly unlikely.
What should borrowers do? If you are a home loan borrower, there is hardly anything you can do about the interest rate movement, but you can at least ensure that you are getting the best possible deal on your home loan. If you are planning to buy a house and take a home loan then it will be a matter of relief that you would not need to pay higher interest rate.
“This steady repo rate is anticipated to foster stability in home loan lending rates, which is encouraging ahead of the festive season, where we expect the demand for homes to remain strong, especially in the luxury segment,” says Ashwin Chadha, CEO, India Sotheby’s International Realty.
As interest rates have peaked, most of the existing borrowers will be paying the highest interest rates seen in the last three years on their EMIs. If you are an old borrower, servicing a loan under previous regimes like the MCLR or base rate, then it may be a good time to shift to the new EBLR regime. This is because when there is a fall in interest rates, you will quickly benefit from it.
Compare your interest rate with those of other lenders. If you find that they are offering a much lower interest rate to a new borrower, you should consider transferring your loan after calculating the net benefit. However, if your lender is giving a much lower rate to new borrowers, then you may request your lender to reprice your loan at a lower rate. Lenders usually charge a repricing fee to restructure your loan at the new rate.
Regular partial prepayment is one of the best ways to pay off your home loan quickly. However, this option works only when you have adequate surplus to make the prepayments. If you have more money in hand after getting a salary raise, then you may consider increasing your EMI so that your total interest outgo can be brought down. If you get a bonus, incentive or any other form of windfall gain, consider going for partial prepayment so that your home loan outstanding comes down; this will help you reduce the tenure and total interest outgo on the loan.
As interest rates have reached very close to their peak home loan borrowers can expect things to get better from here as the chances of interest rate reduction appears to be higher. “Bond markets have already been discounting rate cuts, and 10-year G-Sec yields are down by 30 bps from this year’s peak levels. Home loan borrowers would do well to stick to their floating interest rate loans for now, even if fixed-rate loans are available at some discount,” says Anshul Gupta, Co-Founder and Chief Investment Office, Wint Wealth
Colorado Springs-area home sales fell again last month and prices remained flat as the local housing market continued to feel the effects of spiking mortgage rates.
According to a new Pikes Peak Association of Realtors market trends report that examined home sales last month that took place mostly in the Springs and surrounding El Paso County:
• Single-family home sales totaled 1,067 in August, a nearly 22% decline from the same month last year and the 15th consecutive month that local sales have fallen on a year-over-year basis.
• Homes spent an average of 29 days on the market in August before they sold, an increase from 17 days during the same month last year.
• The median price, or midpoint, of homes that sold in August was $480,000, a 0.1% drop from $480,592 in August 2022. Home prices had increased each month from December 2014 to November 2022, but began to slide late last year and now have declined on a year-over-year basis in eight out of the last nine months.
• The supply of homes listed for sale totaled 2,420 in August, down 8.3% from the same month last year. On the one hand, August’s listings were the most for any month since November, yet they remained far below pre-Great Recession years, when August inventories often topped 3,000 and 4,000.
The Springs-area housing market, like that of many other cities, has done an about-face since the second half of last year because of higher long-term mortgage rates.
For years, historically low rates in the neighborhood of 3% for a 30-year, fixed-rate loan helped spur a furious demand for single-family homes. That demand, coupled with a shortage of properties for sale, sent Springs-area median home prices soaring over several years; in June 2022, they hit a record high of $495,000.
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After the Federal Reserve began to hike interest rates last year to tamp down surging inflation, mortgage rates rose, too, and roughly doubled to more than 6% for 30-year loans by the end of last year.
That trend of high rates continued through the first several months of this year. In mid-August, long-term mortgages topped 7%; last week, the national average for a 30-year, fixed rate mortgage was 7.18%, according to mortgage buyer Freddie Mac.
Higher rates have priced many homebuyers out of the market and sent sales plunging.
Local real estate agents, however, have said that the demand for homes remains relatively strong. As a result, and combined with tight inventories, prices haven’t plunged, though they are down from their record highs.
The new home side of the Springs-area housing market also has felt the effects of higher mortgage rates.
In August, 127 permits were issued for the construction of single-family, detached homes, according to a new Pikes Peak Regional Building Department report. August’s tally was up 15.5% compared with the same month last year.
But the pace of home construction through the first eight months of this year remains well behind the same period in 2022, Regional Building Department figures show. Through August of this year, single-family detached permits totaled 1,655, down 36.4% from 2,604 on a year-over-year basis.
The average U.S. rate for a 30-year fixed mortgage fell to 2.99% this week, the second-lowest on record, as investors worried about the economic fallout of the COVID-19 pandemic piled into the bond markets.
The rate fell from 3.01% last week, Freddie Mac said on Thursday. The 15-year fixed-rate averaged 2.51%, also the second-lowest on record, down from last week when it was 2.54%, according to the mortgage financier.
The cheap financing costs likely will boost home sales at a time when the U.S. economy sorely needs a shot in the arm, said Freddie Mac Chief Economist Sam Khater. GDP plunged a record 32.9% in the second quarter as states grappled with the COVID-19 pandemic, the Commerce Department said in a Thursday report.
“Real estate is one of the bright spots in the economy, with strong demand and modest slowdown in home prices heading into the late summer,” Khater said. “Home sales should remain strong the next few months into the early fall.”
U.S. pending home sales increased 17% in June, the second consecutive month of double-digit gains, as the low mortgage rates spurred demand for homes, the National Association of Realtors said in a report on Wednesday.
A seasonally adjusted index measuring signed contracts was 6.3% above the year-ago level after state lockdowns caused by the COVID-19 pandemic pushed transactions into summer months, said Lawrence Yun, NAR’s chief economist.
The future of the U.S. economy depends on how well the coronavirus pandemic is controlled, the Federal Reserve’s rate-setting committee said on Wednesday. That’s not good news for a nation that leads the world in COVID-19 infections and deaths.
“The coronavirus outbreak is causing tremendous human and economic hardship,” the Fed statement said. “The path of the economy will depend significantly on the course of the virus.”
The statement came shortly after the U.S. broke the 150,000 threshold for deaths from COVID-19, as measured by Johns Hopkins University. The U.S. has about 4.2% of the world’s population and has recorded 23% of COVID-19 fatalities. The No. 2 nation for pandemic deaths is Brazil at 88,539, according to the Johns Hopkins data.
The way forward for a U.S. recovery is “extraordinarily uncertain,” Fed Chairman Jerome Powell said in a video-call press conference with reporters after the release of the statement.
Mortgage rates are running at a 22-year high, crimping a housing market already squeezed by high prices.
Home buyers face an average rate of 7.23 percent on a 30-year fixed-rate mortgage, the most popular home loan in the United States, Freddie Mac reported on Aug. 24. That was the highest rate since June 2001.
The rise in rates has cooled demand for homes, with sales of existing homes down sharply from last year. And sellers who locked in low rates during the pandemic are reluctant to put their homes on the market because they fear they will not be able to find a comparable rate when they become buyers.
Mortgage rates are influenced by a number of factors, most beyond our control. The biggest driver is the bond market, but there’s more to it than that, said Melissa Cohn, regional vice president at William Raveis Mortgage, a real estate lender.
recently forecast that the average 30-year mortgage rate would fall to 5 percent by the fourth quarter of next year.
Fed officials have acknowledged that they will need to take into account the potential economic costs of raising rates, and Mr. Yun said that included damage to regional banks, like the collapses of Silicon Valley Bank and Signature Bank.
What can a buyer do to get a lower rate?
It may seem that home buyers have little wiggle room, but there are things they can do to nab a lower rate, Ms. Cohn of William Raveis Mortgage said.
A strong credit score is important, she said, as well as a sizable down payment, usually at least 20 percent of the purchase price. Buyers who can manage that may find that they are in a less competitive market, which could make it easier to close a deal.
“Rates should be lower in the next 12 to 24 months,” Ms. Cohn said, and home buyers can refinance their mortgage when rates drop.
She also advises consumers to compare rates from multiple lenders. “There are no magic tricks,” she said. “You need to shop around.”
Gregory Schmidt covers breaking news and real estate and is the editor of the Square Feet column. More about Gregory Schmidt
A version of this article appears in print on , Section B, Page 4 of the New York edition with the headline: High Mortgage Rates Are Cooling the Demand for New Homes. Order Reprints | Today’s Paper | Subscribe