Lately, the mortgage rates have been pretty flat.
They enjoyed a nice string of six or seven weeks, tumbling down from about 7.25% to 6.75% before losing steam.
Although it is unclear what got them for plateau, I have pointed to things like customs and general uncertainty.
It seems that we are a little fixed at 6.75%, which is not terrible, but not what some had hoped when Trump and Bessent talked about lowering interest rates.
But there is one thing that works in favor of mortgage rates right now, and that is the level the year before.
Like everything else, context means something to mortgage rates
Context means something and when surveys of mortgage rates are released, they typically include one level the year before.
This gives a more complete picture of where they stand today. And can affect things like home buying mood if they are priced lower or higher than previous periods.
In a way, today’s priority rate is not found in a vacuum. It is compared to yesterday, last week and last year.
To illustrate this, one must simply consider that the long-term average for the 30-year-old fasting is about 7.75%.
Meanwhile, the current rate for a 30-year-old today is approx. a full percentage point lower. Hurray! Right?
Well, not exactly. Why? Because the 30-year-old fasting was less than 3% at the beginning of 2022, and in the area 2-4% in the previous decade, before the rates almost tripled a few years ago.
So while mortgage rates are today under their long -term average and not even close to these scary mortgage rates of the 1980s, it doesn’t provide much comfort.
At the end of the day, the rate is still much higher than it used to be, and all people are thinking about.
They don’t care what normal priority rates are. They are interested in being far higher than what their friend or family member has.
They are interested in the fact that interest rates are costly, which makes it super difficult to afford a home purchase today.
Mortgage rates can’t do anything and look better, but how?
Now the semi-good news. If you look at mortgage rates today against last year they are lower.
Not much lower, but they are actually lower. Per MND’s daily rate survey was the 30-year-old fasting an average of 6.78% today.
This is not much different from the 6.79%it was on average a week ago. It’s pretty unchanged.
However, prices are 33 basic points (BPS) below the previous year. So in mid-March 2024, the 30-year-old was closer to 7,125%.
But here it gets interesting. The 30-year-old fasting was 6.87% on March 11, 2024, which means that the difference between it and 6.79% rate seen last week was only 8 bps.
In other words, the gap between today’s rates and the year before has grown expanded. And not because the mortgage rates have fallen recently.
That’s because at this time last year, the mortgage rates rose. So if they just remain flat, it will hole grow wider when the days go by.
The 30-year-old fasting rose to about 7.50% by mid-April last year, which means that if the 30-year-old fasting only stays at 6.75%, the rates will eventually be 75 bps lower than the previous year.
If the rates happen to fall to say 6.50% over the next month, the rates would be a fully percentage point lower!
So not much needs to happen for the year-over-year numbers to start looking much brighter.
Lower yoy mortgage rates increase the home buyer’s mood (and finances)
Spring home purchase season is currently underway, with the months of April to June, typically the highest purchase season, according to the National Association of Realtors.
As noted, if mortgage rates simply do nothing and is still approx. 6.75% next month, they will be approx. 75 BPS below their annual levels of 7.50%
If they get to one more smash and arrive at 6.50% next month they will be 1% lower yoy.
And you can knock on real estate agents, loan managers and mortgage brokers pointing to this fact to potential home buyers and existing homeowners.
For buyers it will be sold as lower rates, increased warehouse and perhaps more sellers who are willing to bend on price.
The combination could be enough to turn things around and make the 2025 spring to buy home in the spring much better than last year.
The problem with last year the rates started the year at about 6.70% and rose to 7.50% during the high -sales season.
It was a buzzkill and the housing market suffered as a result. Existing home sales were terrible last year and recorded just over four million sales, the lowest total amount since 1995.
And maybe everyone has come down to the timing. The mortgage rates fell to about 6% in September, but the highest buy/sales season had already passed.
So if the timing is right this year and the rates are simply maintaining, it can be a blessing to the home sales and they could best 2024 numbers.
At the same time, you have existing homeowners who could be ripe for a rate and term refinancing for the same reason.
If they got a mortgage loan last spring when the rates were closer to 7.50%but missed out on the small window to refinance before the rates rose again, they could also be in the money to save some bucks.
Before creating this site, I worked as a banking director of a wholesale loan in Los Angeles. My practical experience in the early 2000s inspired me to start writing about mortgage loans 19 years ago to help potential (and existing) home buyers better navigate the home loan process. Follow me on x for hot take.
