Weekly Mortgage Rates Rebound, But Larger Trend Could Shift Market
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It can be extremely frustrating to track mortgage interest rates closely. Daily and even weekly, you'll see dramatic dips and jumps. But zoom out and that instability disappears into the larger overall trend.
That's very evident this week, as the 30-year fixed-rate mortgage rate jumped 27 basis points, averaging 6.16%. A basis point is one one-hundredth of a percentage point.
Mortgage rates bounced upward following the Federal Reserve's announcement of a 50-basis-point cut to short-term rates. Overall, mortgage interest rates have been on a downward trajectory since May, but rates rebounded a bit as other parts of the market worked through the news. Whether mortgage rates stabilize or continue edging downward remains to be seen.
Lower rates change homeowners' math
Even with this week's correction, interest rates on 30-year, fixed-rate loans are still more than a full percentage point below this year's peak and more than a percentage point and a half below the high of 7.76% in November 2023. Each time rates go down, the refinance math will start mathing for more homeowners who bought when rates were high.
It might even prompt more homeowners to consider selling. Much has been made of the effects of rate lock-in, with homeowners unwilling or unable to give up their low interest rates to sell and move. Researchers from the Federal Housing Finance Agency estimate that rate lock-in prevented approximately 1.72 million home sales between the second quarters of 2022 and 2024.
Looking beyond the numbers
A homeowner looking to sell and move might have to stomach a loan with double their current mortgage rate. But the interest rate is only part of the equation.
With how much home prices have risen in recent years, even someone who relatively recently bought their home could find they have a substantial amount of home equity. Equity is the difference between the current value of the home (not its price when you bought it) and the amount still owed on the mortgage. In a home sale, after paying off the mortgage and paying closing costs, the remainder of that equity is yours.
That equity could be parlayed into a sizable down payment. Making a larger down payment can help you nab a lower interest rate and, of course, means your loan amount is smaller. It's also an advantageous position to be in as a home buyer since a larger down payment can increase a seller's confidence in your offer.
There's also much to consider beyond the numbers. Your home is an investment, but unlike other investments, you have to live in it. Think about how much a shorter commute, a better school district, an outdoor space — or whatever it is your current home lacks — could change your life. A decision that doesn't look amazing on paper could turn out to be the right one for you.
