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Mortgage interest rates appear to be stable. Experts say this could be a good sign for the market.
The average interest rate on a 30-year fixed-rate mortgage in the U.S. fell slightly to 6.78% in the week ending Nov. 14, but little changed from 6.79% the week before, according to Freddie Mac data via the Federal Reserve.
“Although it’s higher than the increase we’ve seen in recent weeks, it’s probably good news for homebuyers,” said Jessica Lautz, deputy chief economist and vice president of research at the National Association of Realtors.
“Significant changes in interest rates create significant uncertainty in the market,” Lautz said.
Mortgage rates fell this fall on expectations for the first rate cut since March 2020. But borrowing costs rose again this month as bond markets reacted to Donald Trump’s election victory.
The president-elect has talked about lowering mortgage rates, but experts say he has no control over the cost of mortgage borrowing.
Instead, mortgage rates are closely tied to Treasury yields and are partially influenced by movements in the federal funds rate.
“They’re anticipating inflationary policy, whether it’s tariffs, whether it’s increased government spending, whether it’s tax bills,” said James Tobin, president and CEO of the National Association of Home Builders. “They’re pricing in more inflation.” “As the bond market reacts, mortgage rates will likely react as well.”
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Cheng Zhao, chief economist at online real estate brokerage Redfin, said lower volatility could be a good sign.
“The high volatility itself actually makes mortgage rates even higher than government bond yields,” Zhao said. “More stable interest rates also mean homebuyers don’t have to worry about how much their budget will allow for changes when looking for a home.”
Trump’s team did not respond to requests for comment.
Don’t expect “significant changes” in mortgage interest rates
Election uncertainty contributed to higher mortgage rates during October. Interest rates then rose further last week as stock markets and yields reacted to the election results.
The 10-year U.S. Treasury yield rose 15 basis points to close at 4.43% on Nov. 6, the first since July, as investors bet that Trump’s inauguration would spur economic growth and increase government spending. reached a high level. On the day, the two-year government bond yield rose 0.073 basis points to 4.276%, the highest level since July 31st.
But now that we have an incoming president, mortgage rates are expected to gradually decline over time, Lautz said.
From a monetary policy perspective, future rate cuts are up in the air. Federal Reserve Chairman Jerome Powell said Thursday that strong U.S. economic growth will allow policymakers to sit down and decide how far and how quickly to cut interest rates.
Robert Dietz, chief economist at NAHB, said if the Fed continues to ease the federal funds rate, it could indirectly put downward pressure on mortgage rates.
“However, improved growth expectations will lead to higher interest rates and higher government deficits,” he said.
Experts say mortgage rates could be headed for a “bumpy” or “volatile” path over the next year.
“I don’t think it will fluctuate much beyond the 5% range,” Lautz said. “We expect interest rates to be in the 6% range towards 2025,” he said.
How buyers, sellers and homeowners can benefit
Interest rates trending downward could present an opportunity for buyers who have been looking for a home for a while, especially as the winter season begins. Competition tends to slow during the winter months, when homebuyers with children are in the middle of school. “It’s been less than a year, but I’m reluctant to move,” Lautz said.
We expect interest rates to be in the 6% range heading into 2025.
Jessica Lautz
Jessica Lautz, Deputy Chief Economist and Vice President of Research, National Association of Realtors
Current homeowners can also take full advantage of lower rates.
For example, if you bought your home around this time last year, when mortgage rates peaked at about 8%, you may benefit from refinancing your mortgage, Lautz said.
Jeff Ostrowski, a housing expert at Bankrate.com, said after the Fed’s first rate cut this fall, it “makes sense” to consider refinancing if your interest rate has dropped a point or two since you took out your loan. “There are,” he told CNBC.
Keep in mind that refinancing your loan is not free. There may be associated costs, such as closing costs, appraisal, and title insurance. LendingTree economist Jacob Channell said at the time that refinancing could cost between 2% and 6% of the loan amount, although the total cost would vary by region.
If you’re wondering whether you should refinance, experts say find out what interest rates are and contact your lender to see if refinancing makes sense for you.
Homeowners achieved record home equity. According to CoreLogic, net homeowner equity among U.S. homeowners with mortgages will exceed $17.6 trillion in the second quarter of 2024. Housing equity increased $1.3 trillion in the second quarter of this year, an 8.0% increase from the same period last year.
If you’re looking to sell your current home, a larger down payment may help offset the slightly higher borrowing costs on your next property, Lautz said.
