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Mortgage rates dropped more than 30 basis points across multiple terms last week, and they remain low today. After spiking close to 8% last month, 30-year mortgage rates have finally dropped back down and are hovering below 7% for the first time in two months.
Economic data shows inflation is slowing and the labor market is cooling, which has helped push mortgage rates down in recent weeks. As the economy continues to normalize, rates should, too — though that probably means we’ll see rates end up in the 5% to 6% range in the longer term, rather than the historic 2% to 3% lows we saw during the height of the COVID-19 pandemic.
In its November forecast, the Mortgage Bankers Association predicted that 30-year mortgage rates will fall to 6.1% by the end of 2024 and 5.5% by the end of 2025. This should provide a significant boost in affordability to hopeful homebuyers, though high home prices still remain a barrier for those with less spending power.
Mortgage Rates Today
Mortgage Refinance Rates Today
Use our free mortgage calculator to see how today’s mortgage rates will affect your monthly and long-term payments.
By plugging in different term lengths and interest rates, you’ll see how your monthly payment could change.
Mortgage Rate Projection for 2023
Mortgage rates started ticking up from historic lows in the second half of 2021 and increased over three percentage points in 2022.
Rates have increased even further this year, though they may start falling soon as inflation continues to slow. In the last 12 months, the Consumer Price Index rose by 3.2%, a significant slowdown compared to when it peaked last year at 9.1% in June.
For homeowners looking to leverage their home’s value to cover a big purchase — such as a home renovation — a home equity line of credit (HELOC) may be a good option while we wait for mortgage rates to ease. Check out some of the best HELOC lenders to start your search for the right loan for you.
A HELOC is a line of credit that lets you 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’re borrowing in a lump sum. It also lets you tap into the money you have in your home without replacing your entire mortgage, like you’d do with a cash-out refinance.
Current HELOC rates are relatively low compared to other loan options, including credit cards and personal loans.
When Will House Prices Come Down?
Home prices declined a bit on a monthly basis late last year, but we aren’t likely to see huge drops anytime soon thanks to extremely limited supply.
Fannie Mae researchers expect prices to increase 3.9% in 2023, while the Mortgage Bankers Association expects a 5.7% increase in 2023 and a 4.1% increase in 2024.
Sky high mortgage rates have pushed many hopeful buyers out of the market, slowing homebuying demand and putting downward pressure on home prices. But rates may start to drop next year, which would remove some of that pressure. The current supply of homes is also historically low, which will likely keep prices from dropping.
Fixed-Rate vs. Adjustable-Rate Mortgage Pros and Cons
Fixed-rate mortgages lock in your rate for the entire life of your loan. Adjustable-rate mortgages lock in your rate for the first few years, then your rate goes up or down periodically.
So how do you choose between a fixed-rate vs. adjustable-rate mortgage?
ARMs typically start with lower rates than fixed-rate mortgages, but ARM rates can go up once your initial introductory period is over. If you plan on moving or refinancing before the rate adjusts, an ARM could be a good deal. But keep in mind that a change in circumstances could prevent you from doing these things, so it’s a good idea to think about whether your budget could handle a higher monthly payment.
Fixed-rate mortgage are a good choice for borrowers who want stability, since your monthly principal and interest payments won’t change throughout the life of the loan (though your mortgage payment could increase if your taxes or insurance go up).
But in exchange for this stability, you’ll take on a higher rate. This might seem like a bad deal right now, but if rates increase further in a few years, you might be glad to have a rate locked in. And if rates trend down, you may be able to refinance to snag a lower rate
How Does an Adjustable-Rate Mortgage Work?
Adjustable-rate mortgages start with an introductory period where your rate will remain fixed for a certain period of time. Once that period is up, it will begin to adjust periodically — typically once per year or once every six months.
How much your rate will change depends on the index that the ARM uses and the margin set by the lender. Lenders choose the index that their ARMs use, and this rate can trend up or down depending on current market conditions.
The margin is the amount of interest a lender charges on top of the index. You should shop around with multiple lenders to see which one offers the lowest margin.
ARMs also come with limits on how much they can change and how high they can go. For example, an ARM might be limited to a 2% increase or decrease every time it adjusts, with a maximum rate of 8%.