LOS ANGELES (AP) — Prospective homebuyers are facing higher costs to finance a home with the average long-term U.S. mortgage rate moving above 7% this week to its highest level in nearly five months.
The average rate on a 30-year mortgage rose to 7.1% from 6.88% last week, mortgage buyer Freddie Mac said Thursday. A year ago, the rate averaged 6.39%.
When mortgage rates rise, they can add hundreds of dollars a month in costs for borrowers, limiting how much they can afford at a time when the U.S. housing market remains constrained by relatively few homes for sale and rising home prices.
“As rates trend higher, potential homebuyers are deciding whether to buy before rates rise even more or hold off in hopes of decreases later in the year,” said Sam Khater, Freddie Mac’s chief economist. “Last week, purchase applications rose modestly, but it remains unclear how many homebuyers can withstand increasing rates in the future.”
AP business correspondent Alex Veiga reports mortgage rates reaching their highest level in months.
After climbing to a 23-year high of 7.79% in October, the average rate on a 30-year mortgage had remained below 7% since early December amid expectations that inflation would ease enough this year for the Federal Reserve to begin cutting its short-term interest rate.
Mortgage rates are influenced by several factors, including how the bond market reacts to the Fed’s interest rate policy and the moves in the 10-year Treasury yield, which lenders use as a guide to pricing home loans.
But home loan rates have been mostly drifting higher in recent weeks as stronger-than-expected reports on employment and inflation have stoked doubts over how soon the Fed might decide to start lowering its benchmark interest rate. The uncertainty has pushed up bond yields.
The yield on the 10-year Treasury jumped to around 4.66% on Tuesday — its highest level since early November — after top officials at the Federal Reserve suggested the central bank may hold its main interest steady for a while. The Fed wants to get more confidence that inflation is sustainably heading toward its target of 2%.
The yield was at 4.64% at midday Thursday after new data on applications for unemployment benefits and a report showing manufacturing growth in the mid-Atlantic region pointed to a stronger-than-expected U.S. economy.
“With no cuts to the federal funds rate imminent and with the economy still strong, there is no reason to see downward pressure on mortgage rates right now,” said Lisa Sturtevant, chief economist at Bright MLS. “It seems increasingly likely that mortgage rates are not going to come down any time soon.”
Sturtevant said it’s likely the average rate on a 30-year mortgage will hold close to 7% throughout the spring before easing to the mid-to-high 6% range into the summer.
Other economists also expect that mortgage rates will ease moderately later this year, with forecasts generally calling for the average rate to remain above 6%.
Mortgage rates have now risen three weeks in a row, a setback for home shoppers this spring homebuying season, traditionally the housing market’s busiest time of the year.
Sales of previously occupied U.S. homes fell last month as home shoppers contended with elevated mortgage rates and rising prices.
While easing mortgage rates helped push home sales higher in January and February, the average rate on a 30-year mortgage remains well above 5.1%, where was just two years ago.
That large gap between rates now and then has helped limit the number of previously occupied homes on the market because many homeowners who bought or refinanced more than two years ago are reluctant to sell and give up their fixed-rate mortgages below 3% or 4%.
Meanwhile, the cost of refinancing a home loan also got pricier this week. Borrowing costs on 15-year fixed-rate mortgages, often used to refinance longer-term mortgages, rose this week, pushing the average rate to 6.39% from 6.16% last week. A year ago it averaged 5.76%, Freddie Mac said.
Pennymac Financial Services earned a profit of $39.3 million in the first quarter of 2024, the California-based multichannel lender and servicer announced Wednesday.
The company’s pretax gain in the first quarter was $43.9 million. That was less than the $38.1 million figure it posted during the same period last year but a significant improvement from the pretax loss of $54.2 million it incurred in fourth-quarter 2023.
“PennyMac Financial reported strong operating earnings in the first quarter, with an annualized operating return on equity of 15 percent in what is expected to be the one of the smallest quarterly origination markets of this cycle,” chairman and CEO David Spector said in a news release. “Strong volume increases in our consumer and broker direct channels drove continued profitability in our production segment.”
The company’s loan production pretax income was $35.9 million during the first quarter, down from $39.4 million in Q4 2023 but up from a pretax loss of $19.6 million in Q1 2023. Production revenue totaled $184.7 million, up 5% from the prior quarter and up 52% year over year.
Pennymac reported that the quarterly increase in production revenue was primarily tied to higher net gains on loans held for sale at fair value due to higher volumes in its direct-to-consumer channel. Meanwhile, the revenue growth compared to Q1 2023 was largely due to higher overall origination volumes and margins.
The total value of its loan acquisitions and originations dropped to $21.7 billion in unpaid principal balance (UPB), down 19% on a quarterly basis and 5% below year-ago levels.
During an earnings call on Wednesday, chief financial officer Daniel Perotti said that “Pennymac maintained its dominant position in correspondent lending in the first quarter” as it acquired $18 billion in volume. That was down from $24 billion in the prior quarter and was “driven by our focus on profitability over volatility,” he said.
In the wholesale channel, Perotti noted that locked loans were up 20% and funded loans were “essentially unchanged” from the prior quarter. But broker-channel margins grew from 79 basis points to 103 basis points during that period.
“The number of brokers approved to do business with us at quarter end was over 4,000 — up 36% from the same time last year,” Perotti said. “And we expect this number to continue growing as top brokers increasingly look for a strong second option.”
Pennymac’s servicing portfolio continues to grow. Its owned mortgage servicing rights (MSR) portfolio had a UPB of $386.6 billion on March 31, up 3% from the end of Q4 2023 and up 18% from the end of Q1 2023.
In response to an analyst’s question during the earnings call, Spector said he expects the company’s servicing channel to lead to more refinance opportunities when mortgage rates eventually decline.
“We have built a really great model in terms of growing the servicing portfolio as a byproduct of our organic growth strategy,” Spector said. “And as we continue to lead in the correspondent space and continue to grow our presence in the broker-direct space, I expect that our servicing will continue to grow at probably even a little faster clip. … I don’t see a melting ice cube scenario anytime in the future.”
Last year, Pennymac earned net income of $144.7 million, a decline of nearly 70% from the $475.5 million profit it posted in 2022. And in fourth-quarter 2023 alone, the company lost $36.8 million.
Its net revenues shrank from $2 billion in 2022 to $1.4 billion in 2023. Its overall profit was largely due to the strong performance of its servicing portfolio.
Legal troubles with Black Knight contributed to the loss in Q4 2023. Late in the year, an arbitrator awarded Black Knight $155.2 million in damages tied to a breach of contract claim in a four-year dispute involving the companies. Black Knight accused Pennymac of copying its mortgage servicing platform.
At the close of the market on Wednesday, Pennymac’s stock price was $92.07, up 4.86% since the start of the year.
“Compared to years in the past, new home sales still aren’t performing as well as necessary to help reduce the high demand for new homes in the near term,” Hepp said. At the end of March, there were an estimated 477,000 new homes remaining for sale, representing an 8.3-month supply at the current sales rate. … [Read more…]
Were the good old days really all that good? Sure, when mortgage rates were below 3%, it was a lot cheaper to purchase a house, but we were also in the middle of a global pandemic.
At the start of 2021, the average rate for a 30-year fixed mortgage was 2.65%, according to data from Freddie Mac. During the homebuying boom of 2020 and 2021, the number of borrowers taking out new mortgages reached a more than two-decade high.
Over the past two years, a combination of high mortgage rates, low housing inventory and sluggish wage growth has crippled affordability for homebuyers.
While many are holding out for mortgage rates to fall, it’s unlikely we’ll see 2% mortgage rates any time soon. In fact, experts hope we don’t.
A return to that kind of low-rate environment would indicate major problems in the economy, said Alex Thomas, senior research analyst at John Burns Research and Consulting.
Mortgage rates typically fall during a recession. But a recession also comes with widespread unemployment, increased debt, investment losses and overall financial instability.
In today’s housing market, homebuyers should have realistic expectations. Experts predict mortgage rates to inch closer to 6% by the end of the year as inflation cools and the Federal Reserve starts to cut interest rates. Record-low mortgage rates aren’t in the cards again, and that’s likely for the best.
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 did mortgage rates drop below 3% in the first place?
Economic uncertainty and market volatility — whether during an election cycle or a pandemic — impact the direction of mortgage rates. It’s often said that bad news for the economy is good news for mortgage rates, and vice versa.
A significant lever for mortgage rates is the federal funds rate, which the Fed keeps low when it needs to stimulate economic growth. For example, during the 2008 financial crisis, the Fed slashed that benchmark rate to zero to bolster the economy. When there were signs of recovery in 2015, the central bank started raising interest rates again, sending mortgage rates into the 4% to 5% range until 2020.
The COVID-19 pandemic sparked another economic crisis. To incentivize people to borrow and spend money — and avoid a prolonged recession — the Fed once again cut the federal funds rate to near zero and pumped money into the economy by purchasing government bonds and mortgage-backed securities. Mortgage interest rates fell quickly, bottoming out in the mid-2% range in 2021.
But the combination of supply shocks, record-low rates and an extreme increase in money supply from government stimulus helped send prices way up, according to Erin Sykes, chief economist at NestSeekers International.
In early 2022, the Fed had a new problem on its hands: inflation.
💰 Federal Reserve monetary policy
In a recession, the Federal Reserve tries to spur economic growth through quantitative easing, a monetary policy that consists of cutting the federal funds rate to encourage lending and borrowing to consumers, and increasing its purchase of government-backed bonds and mortgage-backed securities.
If the Fed needs to slow the economy down and reduce the money supply in financial markets, it does opposite: quantitative tightening. By increasing the federal funds rate and tapering its bond-buying programs, the central bank raises the cost of borrowing money, which puts upward pressure on longer-term interest rates, like 30-year fixed mortgage rates.
What caused mortgage rates to surge again?
With prices surging in 2022, the Fed’s main tool was to adjust interest rates, making credit more expensive and disincentivizing borrowing. As a result of a string of aggressive rate hikes, the federal funds rate went from near zero to a range of 5.25% to 5.5%, where it’s remained since last summer. Average mortgage rates skyrocketed, peaking past 8% last October.
Although inflation has gone down, the Fed isn’t ready to start lowering rates just yet. The central bank would like to see evidence of a weaker economy (including consistently lower inflation and higher unemployment) before making any adjustments to its monetary policy.
📈 How the Fed impacts mortgage rates
Though the Federal Reserve doesn’t directly set mortgage rates, it controls the federal funds rate, a short-term interest rate that determines what banks charge each other to borrow money. When the federal funds rate moves up, it impacts longer-term interest rates, like 30-year fixed mortgage rates, as banks raise interest rates on home loans to keep their profit margins intact.
Why won’t mortgage rates move toward 2% again?
Economists and housing market experts agree that mortgage rates will fall over the next several years, but not below 3%.
When mortgage rates hit their record lows just a few years ago, the federal funds rate was near zero. As the Fed starts cutting rates later this year, the plan is to do so slowly and incrementally. Barring another major economic shock, the Fed projects the federal funds rate will take only modest adjustments down.
In the most recent policy meeting, Fed Chair Jerome Powell remarked that the federal funds rate “will not go back down to the very low levels that we saw” during the financial crisis, suggesting that the economy can adapt to a more “neutral” benchmark rate range of between 2.4% to 3.8% in the long run, i.e., less tightening, but not too much easing from the current range of 5.25% to 5.5%.
The Fed would be forced to lower rates close to zero only if there were a dramatic economic shock, such as a pandemic or recession, said Selma Hepp, chief economist at CoreLogic. In that case, if the central bank started purchasing government bonds and mortgage-backed securities again, there’s a possibility mortgage rates could return to those record lows.
However, without such an upheaval, there’s a floor under how low mortgage rates will go, and it’s highly unlikely they’ll ever drop to their 2020-2021 levels.
“With the Federal Reserve ending quantitative easing and stepping out of the market for mortgage-backed securities, rates will settle at a much higher level,” said Matthew Walsh, housing economist at Moody’s Analytics.
Moody’s Analytics predicts mortgage rates will stabilize between 6% and 6.5% over the next few years. That’s high compared with the recent past, yet it’s a historically normal range for mortgage rates.
How can homebuyers adapt to higher mortgage rates?
The housing market is frustrating, but prospective homebuyers are starting to come to terms with this new reality. Following the pandemic, people are moving on with their lives, whether that’s building a family, relocating, downsizing or upgrading.
For some households, that means making room in their budget for a monthly mortgage payment at a 6% or 7% rate.
When you monitor mortgage rate movement, you’re usually looking at national averages determined by weekly rate information provided by lenders. While those rates give a picture of the “typical” mortgage rate, that’s not necessarily the rate you’ll get when applying for a mortgage.
It’s possible to get a better deal on your mortgage.
To qualify for a mortgage, most lenders require you to have a minimum credit score of 620, but lenders offer the lowest mortgage rates to consumers with excellent credit scores, around 740 and above.
You might also consider purchasing mortgage points, also known as discount points. This is an extra fee you pay upfront in exchange for a lower interest rate. Each mortgage point typically costs 1% of the purchase price of a home and will lower your mortgage rate by 0.25%.
A shorter-term loan like a 15-year or 10-year mortgage will have a lower interest rate than a 30-year fixed mortgage. Your monthly payments will be higher with a shorter-term loan because you’re paying the loan off in less time, but you’ll save big on interest.
Buying a home is likely the biggest transaction you’ll make in your lifetime. Regardless of the market, carefully assess your needs and what you can afford.
There’s a reason so many people have been struggling to purchase a home this year. Not only are housing prices elevated as a result of low inventory, but mortgages are expensive to sign.
As of this writing, the average mortgage rate on a 30-year loan is 6.82%, according to Freddie Mac. But rates have fluctuated a bit since the start of the year, and they’ll likely continue to do so based on general market conditions.
Meanwhile, most mortgage experts expect rates to cool later in the year. But how low will they go? That’s the big question.
Federal Reserve actions could lower borrowing costs for home buyers
The Federal Reserve raised interest rates 11 times between 2022 and 2023 to help slow the pace of inflation. While the Fed’s actions don’t always completely correlate to movement in mortgage rates, they have the potential to influence them. As such, it’s not a big surprise that mortgages are currently expensive to sign.
There’s some good news, though. Despite the fact that inflation remains stubbornly elevated at over 3%, which is above the 2% level the Fed is targeting, it’s cooled nicely since 2022. As such, the Fed still thinks it can move forward with three interest rate cuts in 2024, the first of which could come within months.
What this means is that mortgage rates could fall quite a bit between now and the end of the year. But it’s tough to get a handle on how low they’ll go.
More: Check out our picks for the best mortgage lenders
Is it conceivable that mortgage rates will drop to about 6%? Yes. Whether they’ll go lower is the big question, and that’s a hard one to answer right now.
In January, the National Association of Realtors projected that mortgage rates would fall to 6.3% by the fourth quarter of the year. But if rates fall to 6.3% at the start of that quarter, they may be closer to the 6% mark by the end of it.
How to lock in the most competitive mortgage rate you can
It’s hard to know exactly how low mortgage rates will go in 2024. So instead of fixating on that, try to focus on steps you can take to set yourself up for a more attractive mortgage rate.
For one thing, try boosting your credit score. You can do so by paying bills on time and shedding some credit card debt. Checking your credit report for errors is also a great idea.
Also, try to work on reducing your debt-to-income ratio. That measures the percentage of your income that’s allocated toward existing debt payments. Paying off some credit card debt could help in this regard, too.
Finally, be prepared to shop around. You never know when one lender might have a better rate to offer you than another.
It’s fair to assume that mortgages will be less expensive to sign by the time 2024 gets close to wrapping up. But how much less expensive is a question that remains tough to answer.
“Mortgage rates continued to move higher last week, reaching their highest levels since late 2023 and putting a damper on applications activity,” MBA chief economist Joel Kan said in a news release emailed to MPA. “The 30-year fixed rate increased for the third consecutive week to 7.24%, the highest since November 2023.” The refinance index … [Read more…]
For many aspiring homebuyers, the dream of homeownership has become increasingly difficult to attain in recent years. A combination of soaring home prices and rising mortgage rates has made purchasing a property significantly more expensive, stretching budgets to their limits. For example, the median home price nationwide hit $417,700 in Q4 2023 — up from an average of $327,100 in Q4 2019. And, 30-year fixed mortgage rates currently average 7.30%, more than double what they were just a few years ago.
That said, it can still make sense to buy a home right now, even with today’s unique challenges looming. After all, high rates generally mean buyer competition is down, so it could be a good time to make your move. And, while you may be thinking about waiting for rates to fall, there’s no guarantee that will happen in the near future. Plus, you always have the option to refinance your mortgage loan at a lower rate if mortgage rates do eventually decline.
But getting approved for a mortgage in today’s unique landscape can prove challenging even for borrowers with strong credit and stable employment. Lenders have understandably grown more cautious in the face of economic headwinds, making the application process more rigorous. So what should you do if your mortgage loan application is denied by a lender?
Find out how affordable the right mortgage loan could be today.
Was your mortgage loan application denied? 9 steps to take
If your mortgage application has been denied, it’s important not to lose hope. There are steps you can take to improve your chances of approval:
Request the denial reasons in writing
By law, lenders must provide you with the specific reasons for denial in writing upon request. This documentation is essential, as it will allow you to precisely identify and address the problem areas that led to the rejection. Never assume you know the reasons; get them directly from the lender so you know what to focus on instead.
Explore your top mortgage loan options and apply for preapproval now.
Review your credit report
Mistakes and inaccuracies on credit reports are surprisingly common. If your mortgage loan application is denied, obtain your free annual credit reports from all three major bureaus (Experian, Equifax and TransUnion) and scrutinize them carefully. If you find any errors, dispute them with the credit bureaus to have them corrected or removed, as this could significantly boost your approval chances.
Work to improve your credit
For many buyers, a subpar credit score is the roadblock to mortgage approval. If a low credit score causes your mortgage application to be denied, take proactive steps like paying all bills on time each month, reducing outstanding balances on credit cards and other loans and avoiding opening new credit accounts in the short term. Improving your credit profile can rapidly enhance your mortgage eligibility.
Increase your down payment
Many lenders favor borrowers who can make larger down payments upfront. Not only does this lower the overall mortgage loan amount, but it demonstrates your commitment and ability as a borrower. Options to boost your upfront contribution include tapping employment bonuses, tax refunds, gifts from relatives or simply saving more aggressively.
Find a co-signer
If your own income and credit aren’t adequate for mortgage approval, applying jointly with a creditworthy co-signer could be the solution. A spouse, parent or other party with strong finances can boost the overall application through their positive profile. However, it’s imperative that all parties understand and accept the legal obligations before proceeding.
Explore government-backed loans
While conventional mortgages from banks and lenders typically have stringent requirements, loans insured by government agencies tend to have more flexibility. If you meet the eligibility criteria for an FHA, VA or USDA loan based on income limits, military service or rural location, these could represent a pathway to homeownership.
Find ways to increase your income
If you’re denied due to a high debt-to-income (DTI) ratio, finding ways to boost your monthly earnings could be the deciding factor. Options to do this include requesting a raise from your current employer, finding a higher-paying job or establishing steady side income from a second job or freelance work.
Change lenders
Not all mortgage lenders evaluate applications through the same underwriting models or with the same risk appetite. While one bank may deny you, another lender could give you a green light after reviewing the exact same financial information. So, if you’re denied a mortgage loan with one lender, it makes sense to shop around, ask questions and get multiple assessments to find the right fit.
Wait and apply again
Mortgage approvals are based on a specific snapshot of your finances at one point in time. If rejected, sometimes the best recourse is to press pause, work on improving weak areas over several months and then reapply with an updated financial profile for a fresh evaluation.
The bottom line
A denied mortgage can be disheartening, but don’t give up hope. With diligent preparation, an openness to explore alternative pathways and a willingness to make difficult but necessary changes, you may still have options to secure financing and make your homeownership dreams a reality. Ultimately, perseverance and knowledge are key when faced with today’s uniquely challenging housing market.
Angelica Leicht
Angelica Leicht is senior editor for CBS’ Moneywatch: Managing Your Money, where she writes and edits articles on a range of personal finance topics. Angelica previously held editing roles at The Simple Dollar, Interest, HousingWire and other financial publications.
Mohtashami kicked off the sessions by talking about the differences between the current mortgage rate environment and some of what was seen in the early days of the financial crisis of the 2000s, saying that Americans generally are in a much better position than they were back then.
The Fed has recently indicated that it is not likely to reduce interest rates anytime soon due to economic indicators, and Mohtashami revived a 2022 prediction about what it will take to get the Fed to “break” on rates.
“In 2022, I brought up the premise that the Fed will not pivot until the labor market breaks,” he said. “So, if all of you are looking for a sustained lower move in mortgage rates, that’s what you’re going to see.”
While a lot of the oxygen in the discussion is taken up by inflation, Mohtashami asserts that’s not what the Fed is primarily focused on.
“What the Fed wants to see is the labor market get very soft and to the point that it’s breaking, and then they will find all the confidence in the world to do rate cuts and talk about making sure we have a soft landing,” he said.
Reading the data, he said, might tell a different story about the situation as opposed to strictly paying attention to what Fed officials are saying.
Illuminating data points include wage growth, job openings, the number of people quitting to find higher-paying work, and jobless claims on a weekly or monthly basis. These help observers to monitor changes in the labor market similarly to the Fed, he explained.
From there — and when combined with employment in construction and housing permit data — the thinking around rates will become clearer.
“If the labor market gets softer and the Fed starts getting a little bit more dovish, then not only can the spreads get better, but if the 10-year yield goes down, there’s your 6% [or] sub-6% mortgage rates,” he said. “But this means the labor market has to break. So, we’re all focusing on inflation, but not what really matters.”
Simonsen: More data, less ‘vibes’
A lot of the conversation in the housing market can be focused on “vibes,” or general feelings about the way things are going. Simonsen explained to attendees at The Gathering that focusing instead on real-time data is key to having accurate, predictive indicators about where the market is at and where it will go.
Simonsen began his presentation by talking about an early Altos interaction with both Goldman Sachs and Lehman Brothers. In 2007, right around the time he started Altos Research, he was attending a conference where representatives of both companies were speaking. After they finished speaking, he aimed to pitch both companies on why they might need the kind of data Altos specializes in.
He recalled his pitch.
“I’m Mike Simonsen, my company is Altos Research, and we track every home for sale in the country every week,” he recalled saying. “We check all the pricing, all the supply and demand, and all the changes in that data, and we give that to you because traditional housing data is months behind the curve before you see what’s happening.”
The Lehman representative turned him down flatly, saying, “We’ve got so much more data than you can possibly imagine. We’re making so much money. Don’t even bother,” Simonsen recalled.
The Goldman representative was more open to hearing what he had to say, and 12 weeks later engaged with Altos as a client. A year later, Lehman Brothers went out of business, Simonsen explained.
Simonsen asserted that monitoring changing data points on a daily and weekly basis — including inventory levels, new and pending home sales, and home price data and signals —can help to more efficiently track the impact of mortgage rates.
“I believe that our obligation is to communicate with the data for everybody in the cycle, from the biggest players down to every single homebuyer and seller,” Simonsen said.
He began by looking at fresh inventory data.
“The biggest takeaway from when we’re looking at the inventory numbers is rising rates constitute rising inventory — or put another way, demand slows, inventory grows,” he said. “And that’s actually counterintuitive for a lot of folks who are just casually looking at the data.
“They think, ‘Mortgage rates are higher, nobody’s going to sell, therefore inventory is going to fall when rates fall again. Then we’ll finally get some inventory.’ But the data shows that actually, the opposite is true.”
Multiple years of higher rates will be needed to return inventory to pre-pandemic levels, but inventory growth is rising across the country, particularly in states like Florida and Texas, he explained.
More home sellers are also starting to enter the market. Last year, rising rates depressed seller participation, but higher rates are starting to be seen as more of a norm. A general sense of predictability will allow more sellers to enter the market, he said.
Prices are likely to remain stable due to higher rates, he added.
“More data, less vibes,” Simonsen said.
Fairweather: Less affordability
Daryl Fairweather of Redfin primarily spoke about housing demand; generational participation in the market; the impact of climate events and natural disasters on homebuying activity; and the flexibility that renters might experience, particularly as weather events become more prominent nationwide.
“People are spending more and more of their money on housing, and housing isn’t getting any more affordable,” she said. “We still have this underlying shortage of homes.”
But the presentation was primarily designed to be forward looking, and in that respect, interest rates and inflation are elevated, but the economy is growing. Demographics are also changing, with millennials being the largest generation and Gen Z being smaller but increasingly influential in the economy.
Changing preferences and economic realities are also disrupting long-standing paradigms related to housing in the U.S., she said.
“It used to be that homeownership was the American dream, and now it’s more the American pipe dream,” Fairweather said. “People just feel like it’s a ‘pie in the sky’ thing for them to achieve because housing affordability keeps getting worse and worse.”
Climate is also a very real issue having an impact on the housing market, Fairweather said.
“For a long time I would talk about a changing climate and people would say ‘That’s a problem for the future,’” she said. “But now, we’re seeing insurance costs going up and people are deciding where to live based on the climate. It’s becoming a more and more important issue in the housing market.”
Fairweather shared that Redfin experimented in 2020 to analyze the impacts that climate change can have on homebuying behavior over a three-month period in which users were divided into two pools: one that showed them a view of flood risk and one that did not.
“In the control view, there is no flood risk, and then in the treatment view, you could see flood risk for every single home that’s on Redfin,” she said. “The people that were shown flood risk — if they were previously looking at severely or extremely risky homes for flood risk — they went on to buy homes that had half as much risk when they saw that information,” she said.
This communicates a potential value-add opportunity for mortgage professionals to offer more robust climate information, in addition to where interest rates are projected to go or demographic information.
“[That can help] inform them about how to make the best homebuying decision,” Fairweather said.
Average mortgage rates inched lower yesterday. But all that did was wipe out last Friday’s similarly tiny rise.
Earlier this morning, markets were signaling that mortgage rates today might barely budge. However, these early mini-trends often alter 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
7.302%
7.353%
+0.01
Conventional 15-year fixed
6.757%
6.836%
+0.01
30-year fixed FHA
7.064%
7.111%
-0.07
5/1 ARM Conventional
6.888%
8.036%
+0.12
Conventional 20-year fixed
7.199%
7.257%
+0.05
Conventional 10-year fixed
6.663%
6.737%
+0.06
30-year fixed VA
7.292%
7.332%
+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?
This morning’s Financial Times reports, “While the base case remains a reduction in borrowing costs, the options market shows a 20% probability of an increase.” That means most investors think the Federal Reserve will cut general interest rates this year, but they reckon there’s a 20% chance of the central bank actually hiking them. That’s new and scary.
Although the Fed doesn’t directly determine mortgage rates it has a huge influence on the bond market that does. And I very much doubt mortgage rates will fall consistently before the Fed signals that a cut in general interest rates is imminent. And a Fed rate hike is likely to send mortgage rates much higher: maybe back up to 8% or beyond.
So my personal rate lock recommendations remain:
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 edged down to 4.6% from 4.64%. (Good for mortgage rates.) More than any other market, mortgage rates typically tend to follow these particular Treasury bond yields
Major stock indexes were rising this morning. (Bad 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 decreased to $81.59 from $82.06 a barrel. (Good for mortgage rates*.) Energy prices play a prominent role in creating inflation and also point to future economic activity
Goldprices fell to $2,333 from $2,350 an ounce. (Neutral for mortgage rates*.) It is generally better for rates when gold prices rise and worse when they fall. Because gold tends to rise when investors worry about the economy.
CNN Business Fear & Greed index — climbed to 40 from 33 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 be unchanged or close to unchanged. However, be aware that “intraday swings” (when rates change speed or direction during the day) are a common feature right now.
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What’s driving mortgage rates today?
Today
This morning’s two April purchasing managers’ indexes (PMIs) will likely be good for mortgage rates. These “flashes” (initial readings and subject to revision) are both from S&P.
Here are this morning’s actual numbers in bold, alongside the prepublication consensus forecasts, according to MarketWatch, together with the March actual figures:
Services PMI — 50.9 actual; 52 expected; 51.7 in March
Manufacturing PMI — 51.1 actual; 52 expected; 51.9 in March
You can see that the PMIs were worse than expected, which is typically good news for mortgage rates.
Tomorrow
Tomorrow’s durable goods orders for March rarely affect mortgage rates. And they’d need to contain some pretty shocking data to do so tomorrow.
Markets are expecting those orders to have risen by 2.6% in March compared to a 1.3% increase in February. They’ll probably need to be significantly higher than 2.% to exert upward pressure on mortgage rates and appreciably lower to push them downward.
The rest of this week
Nothing has changed since yesterday concerning economic reports due on Thursday and Friday. So, I’ll repeat what I wrote yesterday:
We’re due the first reading of gross domestic product (GDP) for the January-March quarter on Thursday. And that could have a larger effect than PMIs and durable goods orders, depending on the gap between expectations and actuals.
But Friday’s personal consumption expenditures (PCE) price index for March is this week’s star report. That’s the Federal Reserve’s favorite gauge of inflation. And it could certainly affect mortgage rates, possibly appreciably.
The next meeting of the Fed’s rate-setting committee is scheduled to start on Apr. 30 and last two days. So, the PCE price index will be the last inflation report it sees before making decisions.
And index that shows inflation cooling could change the mood at that meeting. True, it’s vanishingly unlikely that a cut to general interest rates will be unveiled on May 1 no matter what.
But a PCE price index that shows inflation cooling could help the Fed to move forward with cuts earlier than expected, which should cause mortgage rates to fall. Unfortunately, one that suggests inflation remains hot or is getting hotter could send those rates higher.
I’ll brief you more fully on each potentially significant report on the day before it’s published.
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 Apr. 18 report put that same weekly average at 7.1%, up from the previous week’s 6.88%. 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 Mar. 19 and the MBA’s on Apr. 18.
Forecaster
Q1/24
Q2/24
Q3/24
Q4/24
Fannie Mae
6.7%
6.7%
6.6%
6.4%
MBA
6.8%
6.7%
6.6%
6.4%
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.
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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?
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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.
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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.
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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.
So, 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.
Indeed, 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.
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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 as evidence of their financial circumstances. 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. And 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.
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Current mortgage rates methodology
We receive current mortgage rates each day from a network of mortgage lenders that offer home purchase and refinance loans. Those mortgage rates shown here are based on sample borrower profiles that vary by loan type. See our full loan assumptions here.
“There’s such scarcity that the first thing that matters is finding a home you like,” said Jay Tuli, president of Leader Bank, which sells 90 percent of its home loans in Massachusetts.
Home sales are down year-over-year due to the lack of inventory, said Theresa Hatton, chief executive of Massachusetts Association of Realtors.
Many prospective buyers who were waiting for the Federal Reserve to begin cutting interest rates by now have reason to give up hope. Inflation isn’t coming down quickly enough and, at 3.5 percent, is still well above the Fed’s 2 percent target. So the central bank won’t trim short-term rates fast enough this year, contrary to what most economists had been expecting. Consequently, the 30-year fixed mortgage rate has risen to 7.1 percent, over 1 percentage point higher than this time last year and 0.6 percent more than January 2024, Freddie Mac reported last week.
“Until inflation cools a bit, we can expect mortgage rates to remain elevated,” said Michael Debronzo, a regional sales executive at PNC Bank, which has noted a slight uptick in loan applications.
The market is closely watching the Fed’s every move and the economy is a confounding puzzle even for experts. That will result in a volatile ride for the remainder of the year.
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With that in mind, here are three things for home buyers to consider, according to Berkshire Bank’s Ellen Steinfeld, head of consumer lending and payments:
Expect home listings to remain tight. That’s because those who financed their homes during the low-rate era are staying in their homes for longer. Even those who were looking to downsize are staying put. Financially, it doesn’t make sense to sell if you also have to buy at these rates. Usually, people try and sell their home before bidding on a new one, but right now it’s the other way around, said Steinfeld, who’s based in Long Island, N.Y.
This also means home prices are unlikely to drop. In certain cases people are paying more than the asking price, engaging in bidding wars. “I anticipate during the remainder of this year we’ll continue to see price appreciation,” Steinfeld noted.
Finally, even though interest rates will likely drop a smidge by late 2024, they won’t reverse anywhere as quickly as their speedy rise postpandemic. Meanwhile, buyers can do cheaper 3- or 5-year adjustable rate mortgages and refinance when rates drop.
“The cost of refinancing is reasonable enough,” Steinfeld said.