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Interest rates have fallen from their peak last year. Good news for homeowners, buyers and sellers
Written by Kevin Joyce, NMLS#304807
Kevin Joyce
The average 30-year fixed-rate mortgage rate last week was about 6.54%, according to Freddie Mac, a government-backed publicly traded company that originates and trades mortgages. The weekly average mortgage rate for a 15-year fixed-rate mortgage was 5.71%.
Most experts agree that the rates affected by past pandemics are just a thing of the past.
Most forecasts expect rates to fall to 6.2% by the end of 2024, and the Mortgage Bankers Association predicts 30-year mortgage rates will fall to 6% in the first quarter of 2025.
There are widespread expectations that the Federal Reserve will cut interest rates at its next meeting, contributing to lower interest rates in 2025. Although the Fed does not set mortgage rates, its actions affect the cost and availability of mortgages.
Interest rates are primarily determined by the yield on 10-year government bonds. The interest rate you pay depends on your lender, your credit score, and the size, type, and term of the loan you’re seeking.
The good news is that interest rates are down from their peak last October, when the 30-year fixed rate was 7.79%. Although interest rates may seem high, they are still well below historical averages.
This is good news for homeowners and provides an opportunity for those who bought a home during the past few years, when interest rates were high, to refinance their mortgage and take advantage of lower interest rates.
Refinancing at a lower interest rate could save you hundreds of dollars a month.
Most experts agree that the rates affected by past pandemics are just a thing of the past.
In 2019, 30-year fixed-rate mortgage rates varied between 3.75% and 4.5%. At the height of the pandemic, it fell to 2.65%.
We expect the new normal in 2025 to be between 5.8% and 6%, but interest rates will fluctuate depending on economic conditions, so a low of 5.5% is possible, but it could rise to 7% .
Although interest rates are set by larger financial markets, in reality, individual expectations of future interest rates and expectations of house price growth are the central drivers of housing and mortgage market behavior.
More simply, expectations about the future depend on whether homeowners put their homes on the market, whether homeowners refinance, and whether buyers and sellers enter the market or hold out. influence whether and when to enter the market.
What does that mean?
For homebuyers, fluctuating interest rates increase uncertainty. Should you wait for interest rates to drop or start buying now? Timing the market is impractical, probably impossible, and unnecessary.
If you purchase a home and mortgage rates go down, buyers can refinance their mortgage to take advantage of a lower interest rate. If interest rates rise, you can benefit from a secure and affordable mortgage.
But if you delay your purchase and interest rates rise, it becomes more difficult to afford a home.
Lower interest rates have other benefits for homebuyers.
When interest rates fall, the inventory of available housing increases. Sellers who had put off moving because they wanted an affordable alternative are putting their homes on the market. “Days on market” has also increased, suggesting less competition in the market.
However, housing prices remain high, and mortgage interest rates are not the only factor influencing vacancy.
The median home price in Rockland County is approaching $700,000, up about 50% from before the pandemic. Median home prices are expected to continue rising, but at a slower rate of growth than seen in recent years.
Winter is a slow time for home sales, but it’s also a good time to shop as there are fewer buyers looking. Traditionally, purchases increase in the spring and peak in early summer. If you can find the right home, there will be less competition, lower prices, and easier negotiations during the winter months.
Fannie Mae predicts that home sales could increase 10% next year, thanks in large part to increased availability and more affordable mortgages.
With lower mortgage rates and more homes available, now is a good time to buy a new home. With the addition of buyers, now is a good time to put your property on the market. It may also be a good time for homeowners who have seen higher mortgage rates lately to consider refinancing.
