As mortgage rates fluctuate, is this the best time to get a good rate?
Suddenly mortgage interest rates are way down. Then they’re up. What’s a consumer supposed to do?
Watch and probably wait.
“This is still a period of extremely elevated volatility, so rates can move quickly both up and down in a short span of time,” said Joel Kan, vice president and deputy chief economist at the Mortgage Bankers Association.
Remember, said Jacob Channel, senior economist at LendingTree, which tracks and analyzes rates: “People struggling to afford a home at 7% will probably still struggle at 6.5%.”
Mortgage rates had risen steadily steadily since early in the year, coinciding with the Federal Reserve’s decision to keep jacking up its key interest rate as a way to fight inflation.
A year ago, the average rate on a 30-year fixed rate loan was 3.05%. Rates kept rising this year, peaking so far at just over 7%.
But in mid-November, the rate suddenly made one of its steepest plunges in decades. Freddie Mac’s weekly lenders survey found the average rate in mid-November for a 30-year fixed mortgage loan was 6.58%, well below the peak of 7.08% recorded two weeks earlier. The rates ticked up a bit, but this week were back down to 6.49%.
“Mortgage rates continued to drop this week as optimism grows around the prospect that the Federal Reserve will slow its pace of rate hikes.,” a Freddie Mac statement said.. “Even as rates decrease and house prices soften, economic uncertainty continues to limit homebuyer demand as we enter the last month of the year.”
The data used in this interactive map, collected from Freddie Mac - Primary Mortgage Market Survey, was updated Thursday. Here are the average mortgage rates by length of loan between December 2021 and December 2022:
That half-point drop since the peak means a homebuyer would save $250 a month on a median-priced home in the state. The median price in California last month was $801,150, down 2.5% from September.
The dip in rates, combined with other factors, should mean this is a good time to buy a home, said Jordan Levine, vice president and chief economist at the California Association of Realtors.
“There are more homes on the market for those buyers to choose from ,” he said, “and more sellers that are willing to negotiate with them, which may also be an incentive to take advantage of the dip in rates. “
But will rates rise again?
Whether the stable or lower rates will last, though, is highly uncertain. The Federal Reserve is expected to increase its key rate again when it meets in mid-December.
One reason the rates have stabilized is that the cost of living has not gone up at the steep pace of this summer. Prices were up 7.7% in the year ending in October, but that was less than the annualized 8.2% recorded in September and 8.3% in August.
Lenders “may have gone a bit overboard in raising rates,” Channel said, fearing they needed more protection against inflation..
Predicting the precise future path of rates is nearly impossible, he and others said. But they tend to agree that consumers should not try to “time” the interest rate market and jump as soon as a rate drops.
Kan, the mortgage bankers’ chief economist, saw a 6.7% average in the current quarter, as he sees data suggesting a slower rate of inflation, slower wage growth and other signs the U.S. and global economies are cooling.
The forecasts tend to be shaky. “On the one hand,” Levine said, “inflation has softened slightly and the likelihood of recession is perceived to be higher..”
But, he added. “Looking out further, inflation is still relatively high, so I think we may still see another (Fed) rate hike or maybe even two smaller ones, so mortgage rates will likely increase again at some point.”
Brianna Taylor contributed to this story
