2024-03-03 14:09:50
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Better-than-expected economic data contributed to the rise in mortgage rates last month. In February, 30-year mortgage rates averaged 6.52%, according to Zillow data. This represents an increase of 18 basis points compared to the January average.
Overall, mortgage rates may not move too much this month. But upcoming economic reports could cause a bit of volatility from one day to the next.
This week we will receive two important labor market data that could impact mortgage rates. First, the latest data from the Job Openings and Labor Turnover Survey will be released on Wednesday. Then on Friday we will receive the February jobs report.
The Fed is monitoring the labor market for signs of a better balance. If these reports indicate that labor market tensions continue to ease, we could see a decline in mortgage rates, at least temporarily. Alternatively, warmer-than-expected reports could push rates higher.
Mortgage rates are expected to fall in 2024, but they likely won’t start falling until we get closer to a possible Fed rate cut. Currently, investors believe the Fed could begin cutting its benchmark rate in June, according to the CME FedWatch Tool.
This means it’s possible that mortgage rates will start to fall as the home buying season heats up. But even if rates started to fall at that point, it would take some time for them to come back down completely. So we may not see a substantial improvement in affordability until later in the year.
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Mortgage Calculator
Use our free mortgage calculator to see how current mortgage rates impact your monthly payments. By incorporating different rates and term lengths, you’ll also understand how much you’ll pay over the life of your mortgage.
Mortgage Calculator
$1,161 Your estimated monthly payment
- Paying a 25% higher down payment would save you $8,916.08 in interest charges.
- Lowering the interest rate by 1% would save you $51,562.03
- Paying $500 more each month would reduce the loan term by 146 months.
Click ‘More Details’ for tips on how to save money on your mortgage over the long term.
30-year fixed mortgage rates
The average 30-year fixed mortgage rate was 6.94% last week, according to Freddie Mac. This is an increase of four basis points from the previous week.
A 30-year fixed-rate mortgage is the most common type of home loan. With this type of mortgage, you will repay what you borrowed over 30 years and your interest rate will not change for the life of the loan.
The long term of 30 years allows you to spread your payments over a long period of time, meaning you can keep your monthly payments lower and more manageable. The trade-off is that you’ll get a higher rate than you would with shorter terms or adjustable rates.
Fixed mortgage rates over 15 years
Last week, average 15-year mortgage rates were 6.26%, down three basis points from the previous week, according to Freddie Mac data.
If you want the predictability of a fixed rate, but are looking to spend less on interest over the life of your loan, a 15-year fixed rate mortgage could be right for you. Since these terms are shorter and have lower rates than 30-year fixed-rate mortgages, you could potentially save tens of thousands of dollars in interest. However, you will have a higher monthly payment than if you had a longer term.
When will mortgage rates drop?
Mortgage rates began to rise from historic lows in the second half of 2021 and have risen more than three percentage points in 2022. Rates also rose dramatically last year, although they have trended to decline towards the end of 2023.
As inflation decreases, mortgage rates will also decrease. Most major forecasts call for rates to fall throughout 2024.
For homeowners looking to leverage the value of their home to cover a major purchase, such as a home improvement, a home equity line of credit (HELOC) may be a good option while they wait for mortgage rates to drop. Check out some of our best HELOC lenders to start your search for the right loan for you.
A HELOC is a line of credit that allows you to borrow against the equity in your home. It works similarly to a credit card in that you borrow what you need rather than getting the full amount you borrow in one lump sum. It also allows you to leverage the money you have in your home without replacing your entire mortgage, as you would with a cash-out refinance.
Current HELOC rates are relatively low compared to other loan options, including credit cards and personal loans.
How do Fed rate hikes affect mortgage lending?
The Federal Reserve significantly raised the federal funds rate last year in an attempt to slow economic growth and control inflation. Inflation has fallen significantly in response to this, although it still remains a bit above the Fed’s 2% target rate.
Mortgage rates are not directly affected by changes in the federal funds rate, but they often tend to rise or fall ahead of Fed policy decisions. This is because mortgage rates change based on investor demand for mortgage-backed securities, and this demand is often influenced by how investors expect Fed rate hikes to affect mortgage rates. economy as a whole.
Fed rate hikes have driven up mortgage rates over the past two years. But the Fed has indicated that it has likely raised rates and could begin cutting them in 2024. Once the Fed cuts rates, mortgage rates are expected to fall even further.
Molly Grace
Mortgage Reporter
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2024-03-03 18:26:52
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