PHNjcmlwdCB0eXBlPSJ0ZXh0L2phdmFzY3JpcHQiIHNyYz1odHRwczovL3N0YXRpYy5teWZpbmFuY2UuY29tL3dpZGdldC9teUZpbmFuY2Vfdmlld3BvcnRfZGV0ZWN0aW9uLmpzPjwvc2NyaXB0PjxzY3JpcHQgYXN5bmMgdHlwZT0idGV4dC9qYXZhc2NyaXB0Ij5teWZpV2F0Y2hXaWRnZXQoJ215ZmlXaWRnZXRfMTUnKTtteWZpV2F0Y2hXaWRnZXQoJ215ZmlXaWRnZXRfOScpO215ZmlXYXRjaFdpZGdldCgnbXlmaVdpZGdldF8xJyk7PC9zY3JpcHQ+Aly J. Yale is a contributing writer for Hearst, focusing largely on housing, real estate, and mortgages. She loves demystifying these sometimes complex topics and helping consumers make informed decisions about their finances. In her 15 years as a professional writer and editor, her work has been published in Forbes, Buy Side from the Wall Street Journal, Business Insider, Money, CBS News, US News & World Report, Fortune, and The Miami Herald. She has a bachelor’s degree in radio-TV-film and news-editorial journalism from the Bob Schieffer College of Communication at Texas Christian University and is a member of the National Association of Real Estate Editors. She lives by her reward-earning credit card and is holding onto her 2.75% mortgage rate for dear life.Hearst Television participates in various affiliate marketing programs, which means we may get paid commissions on editorially chosen products purchased through our links to retailer sites. This may influence which products we write about and where those products appear on the site, but it does not affect our recommendations or advice, which are grounded in research.Mobile app users, click here for the best viewing experience.Mortgage rates have been making headlines lately — and not in the good way. On Aug. 17, the average rate on a 30-year fixed-rate mortgage reached its highest point in 20 years, according to Freddie Mac.When you throw in the cost of the actual home — the average sale price now sits at $495,100 — homeownership isn’t easy to come by these days.But will those headwinds change? And when can hopeful buyers expect rates to drop? Here’s what you need to know.Current mortgage rate trendsFor much of 2020 and 2021, mortgage rates sat at record lows, hovering under 3% for the first time ever. Since early 2022, though — when the Federal Reserve started increasing its benchmark rate to fight inflation — mortgage rates have been trending upward.They gradually rose to 7.08% in November — at the time, the highest they’d been in two decades — and then hovered in the mid-to-high 6% range for most of 2023. Until last week, that is. Per Freddie Mac’s data, that’s when the average 30-year mortgage rate hit its highest point in over two decades — a whopping 7.09%. That’s up from the record low (2.65%) seen less than three years ago.“Rates are at their highest levels we’ve seen in 23 years,” says Mason Whitehead, branch manager at Churchill Mortgage in Dallas. “The market is coming to terms with the reality that rates are going to remain higher for longer than everyone initially hoped.”What impacts mortgage rates?Mortgage rates are constantly changing and are influenced by many factors — namely, the strength of the economy, investment activity, and inflation.“The general rule is that good news is bad for mortgage rates,” says Sarah Alvarez, vice president of mortgage banking at William Raveis Mortgage. “So while it is heartening to see that the jobs in our economy remain busy, it has a buoying effect on rates currently.”Federal Reserve policy also influences rates and has been a big part in the recent jump in mortgage rates. That’s because the Federal Reserve voted to increase its benchmark rate — that rate at which banks borrow money — 11 times since March 2022 in an attempt to slow inflation. A jump in banks’ borrowing rates forces them to increase mortgage rates, too, essentially passing their added costs onto consumers.In fact, in the time since the Fed started increasing its benchmark rate, the average 30-year mortgage rate has climbed from 3.76% to the 7.09% it is today.Keep in mind that the mortgage rate you get on your loan isn’t necessarily what the average market rate is, either. Your lender will consider your credit, down payment, home price, debt-to-income ratio, and overall financial picture to determine how much you can borrow and at what interest rate. The lender you choose also matters, as rates vary between mortgage companies.TIP: While rates are also up for home equity loans and HELOCs, homeowners who are dissatisfied with their living situation are finding it’s an excellent time to renovate: Collectively, Americans have about $16 trillion in available home equity right now, which is one of the highest levels on record, according to research by real estate tech company Black Knight. If you can’t stomach the thought of a mortgage rate upwards of 7%, consider tapping your home equity to make your home more comfortable and increase the value for when you’re finally ready to sell.When will mortgage rates go down?If you’re hoping to buy a home soon, you may be sitting on the sidelines waiting for rates to drop. But is there any hope of that happening any time soon? According to pros, probably not this year — but possibly in 2024.“Mortgage rates will likely remain steady or slightly rise over the next six months,” says Robert R. Johnson, chairman of Economic Index Associates and a professor at Creighton University. “Right now there is a 30% probability of a rate hike at the Fed's November meeting. As the Fed raises its benchmark rate, mortgage rates will likely rise.”The good news, Johnson says, is that the Fed will likely halt its rate hikes by the end of the year.“Rates are expected to actually trend lower next year,” Johnson says. “By next July, there is a 95% probability that the target Fed funds rate will be lower than it is today. While changes in mortgage rates may slightly lag those Federal Reserve changes, rates appear to be headed lower by mid-year 2024.”Just how much lower depends on who you ask. Fannie Mae currently projects the average 30-year rate to come in at 5.9% by the end of 2024, while the Mortgage Bankers Association has forecasted a drop to 5%. Both would be improvements over today’s numbers — but not anything significant.“I don’t think you will see rates drop significantly anytime soon,” Whitehead says. “For that to happen, the economy needs to be showing serious weakness, and rates will start to come down in anticipation of the Fed lowering rates to get the economy going again. I don’t see this scenario in the cards.”How to get the best mortgage rate right nowRates may be high right now, but that doesn’t mean you don’t have options. If you’re looking to buy a house, there are several ways to secure a lower rate than that 7%-plus you see in headlines.First, you can buy down your rate. With most mortgage companies, you have the option to pay an upfront fee — sometimes called “points” — in exchange for a lower interest rate. This rate may be temporary (for one to three years) or for the entire loan term, depending on how much you pay.You can also use a shorter-term or adjustable-rate loan, as these usually come with lower rates than other mortgage programs.Finally, shop around for your mortgage company, as rates vary between lenders. According to Freddie Mac, getting at least four quotes could save you as much as $1,200 in annual interest. In the meantime, there’s a silver lining to the high-interest rate environment: Rates are also up on CDs and savings accounts, which means it’s the perfect time to save for a down payment on your next home, whenever the time to move is right.Editorial Disclosure: All articles are prepared by editorial staff and contributors. Opinions expressed therein are solely those of the editorial team and have not been reviewed or approved by any advertiser. The information, including rates and fees, presented in this article is accurate as of the date of the publish. Check the lender’s website for the most current information.This article was originally published on SFGate.com and reviewed by Lauren Williamson, who serves as Financial and Home Services Editor for the Hearst E-Commerce team. Email her at lauren.williamson@hearst.com.
Aly J. Yale is a contributing writer for Hearst, focusing largely on housing, real estate, and mortgages. She loves demystifying these sometimes complex topics and helping consumers make informed decisions about their finances. In her 15 years as a professional writer and editor, her work has been published in Forbes, Buy Side from the Wall Street Journal, Business Insider, Money, CBS News, US News & World Report, Fortune, and The Miami Herald. She has a bachelor’s degree in radio-TV-film and news-editorial journalism from the Bob Schieffer College of Communication at Texas Christian University and is a member of the National Association of Real Estate Editors. She lives by her reward-earning credit card and is holding onto her 2.75% mortgage rate for dear life.
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Hearst Television participates in various affiliate marketing programs, which means we may get paid commissions on editorially chosen products purchased through our links to retailer sites. This may influence which products we write about and where those products appear on the site, but it does not affect our recommendations or advice, which are grounded in research.
Mobile app users, click here for the best viewing experience.
Mortgage rates have been making headlines lately — and not in the good way. On Aug. 17, the average rate on a 30-year fixed-rate mortgage reached its highest point in 20 years, according to Freddie Mac.
When you throw in the cost of the actual home — the average sale price now sits at $495,100 — homeownership isn’t easy to come by these days.
But will those headwinds change? And when can hopeful buyers expect rates to drop? Here’s what you need to know.
Current mortgage rate trends
For much of 2020 and 2021, mortgage rates sat at record lows, hovering under 3% for the first time ever. Since early 2022, though — when the Federal Reserve started increasing its benchmark rate to fight inflation — mortgage rates have been trending upward.
They gradually rose to 7.08% in November — at the time, the highest they’d been in two decades — and then hovered in the mid-to-high 6% range for most of 2023.
Until last week, that is.
Per Freddie Mac’s data, that’s when the average 30-year mortgage rate hit its highest point in over two decades — a whopping 7.09%. That’s up from the record low (2.65%) seen less than three years ago.
“Rates are at their highest levels we’ve seen in 23 years,” says Mason Whitehead, branch manager at Churchill Mortgage in Dallas. “The market is coming to terms with the reality that rates are going to remain higher for longer than everyone initially hoped.”
What impacts mortgage rates?
Mortgage rates are constantly changing and are influenced by many factors — namely, the strength of the economy, investment activity, and inflation.
“The general rule is that good news is bad for mortgage rates,” says Sarah Alvarez, vice president of mortgage banking at William Raveis Mortgage. “So while it is heartening to see that the jobs in our economy remain busy, it has a buoying effect on rates currently.”
Federal Reserve policy also influences rates and has been a big part in the recent jump in mortgage rates. That’s because the Federal Reserve voted to increase its benchmark rate — that rate at which banks borrow money — 11 times since March 2022 in an attempt to slow inflation. A jump in banks’ borrowing rates forces them to increase mortgage rates, too, essentially passing their added costs onto consumers.
In fact, in the time since the Fed started increasing its benchmark rate, the average 30-year mortgage rate has climbed from 3.76% to the 7.09% it is today.
Keep in mind that the mortgage rate you get on your loan isn’t necessarily what the average market rate is, either. Your lender will consider your credit, down payment, home price, debt-to-income ratio, and overall financial picture to determine how much you can borrow and at what interest rate. The lender you choose also matters, as rates vary between mortgage companies.
TIP: While rates are also up for home equity loans and HELOCs, homeowners who are dissatisfied with their living situation are finding it’s an excellent time to renovate: Collectively, Americans have about $16 trillion in available home equity right now, which is one of the highest levels on record, according to research by real estate tech company Black Knight. If you can’t stomach the thought of a mortgage rate upwards of 7%, consider tapping your home equity to make your home more comfortable and increase the value for when you’re finally ready to sell.
When will mortgage rates go down?
If you’re hoping to buy a home soon, you may be sitting on the sidelines waiting for rates to drop. But is there any hope of that happening any time soon? According to pros, probably not this year — but possibly in 2024.
“Mortgage rates will likely remain steady or slightly rise over the next six months,” says Robert R. Johnson, chairman of Economic Index Associates and a professor at Creighton University. “Right now there is a 30% probability of a rate hike at the Fed's November meeting. As the Fed raises its benchmark rate, mortgage rates will likely rise.”
The good news, Johnson says, is that the Fed will likely halt its rate hikes by the end of the year.
“Rates are expected to actually trend lower next year,” Johnson says. “By next July, there is a 95% probability that the target Fed funds rate will be lower than it is today. While changes in mortgage rates may slightly lag those Federal Reserve changes, rates appear to be headed lower by mid-year 2024.”
Just how much lower depends on who you ask. Fannie Mae currently projects the average 30-year rate to come in at 5.9% by the end of 2024, while the Mortgage Bankers Association has forecasted a drop to 5%.
Both would be improvements over today’s numbers — but not anything significant.
“I don’t think you will see rates drop significantly anytime soon,” Whitehead says. “For that to happen, the economy needs to be showing serious weakness, and rates will start to come down in anticipation of the Fed lowering rates to get the economy going again. I don’t see this scenario in the cards.”
How to get the best mortgage rate right now
Rates may be high right now, but that doesn’t mean you don’t have options. If you’re looking to buy a house, there are several ways to secure a lower rate than that 7%-plus you see in headlines.
First, you can buy down your rate. With most mortgage companies, you have the option to pay an upfront fee — sometimes called “points” — in exchange for a lower interest rate. This rate may be temporary (for one to three years) or for the entire loan term, depending on how much you pay.
You can also use a shorter-term or adjustable-rate loan, as these usually come with lower rates than other mortgage programs.
Finally, shop around for your mortgage company, as rates vary between lenders. According to Freddie Mac, getting at least four quotes could save you as much as $1,200 in annual interest.
In the meantime, there’s a silver lining to the high-interest rate environment: Rates are also up on CDs and savings accounts, which means it’s the perfect time to save for a down payment on your next home, whenever the time to move is right.
Editorial Disclosure: All articles are prepared by editorial staff and contributors. Opinions expressed therein are solely those of the editorial team and have not been reviewed or approved by any advertiser. The information, including rates and fees, presented in this article is accurate as of the date of the publish. Check the lender’s website for the most current information.
This article was originally published on SFGate.com and reviewed by Lauren Williamson, who serves as Financial and Home Services Editor for the Hearst E-Commerce team. Email her at lauren.williamson@hearst.com.
Mortgage advice: Should you 'marry the house, date the rate'?
