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The Fed didn't make a move at the March meeting, but what the Fed had to say about future policy has implications for mortgage rates.

The Fed didn't make a move at the March meeting, but what the Fed had to say about future policy has implications for mortgage rates.

Today's Mortgage Rates - 03/28/2024

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Rates Kick Higher, Will Retreat Some

As expected, mortgage rates pushed higher this week, even as the Fed made no change to short-term interest rates at its March meeting.

As reported by Freddie Mac today, the average offered interest rate for a conforming 30-year fixed-rate mortgage rose by thirteen basis points (0.13%), flaring back up to 6.87% and erasing nearly all of the previous week's decline.

Average offered rates for fifteen-year fixed-rate mortgages also moved upward in the latest survey, posting an increase of five basis points (0.05%), stopping at a rate of 6.21% The change in direction broke a three-week slide in the average offered rate for the most common short-term mortgage.

Relative to a long-term fixed-rate mortgage, the offered rate for the most popular ARM was a little bit more attractive this week. The Mortgage Bankers Association reported that the average offered rate for first five years of a 5/1 hybrid ARM declined by five basis points (0.05%) in their latest survey week, slipping to 6.33%. This expanded the gap between the 30-year FRM and Hybrid 5/1 ARM to 54 basis points, and that half-percentage-point break in the rate would provide a homebuyuer with about a $107 per month savings. In addition, over he first five years of the loan, the 5/1 ARM would see a borrower pay $8,141 less in interest cost. While these figures aren't huge, every little bit helps in a housing market as expensive as is today's.

If you're interested learning the advantages (and pitfalls) of ARMs, you should read HSH's comprehensive Guide to Adjustable Rate Mortgages.

Although mortgage rates moved higher this week, there are already signs that the increase is fading. After less-than-favorable readings on inflation for January and February, investors were becoming concerned that the Fed's December outlook for three cuts in short-term rates this year might have changed, delaying the date of the first change in policy.

However, the Fed did not change its forecast, and while nearly a third of the year has already fallen behind us, the expectation for three cuts in rates remains in place. This despite the Summary of Economic Projections now forecasting both somewhat stronger growth and core inflation that isn't expected to retreat as quickly as it was just a few months ago.

With the December outlook reaffirmed, investors relaxed somewhat. Stock markets rallied and interest rates eased a little, setting the state for lower mortgage rates next week.

Fed Chair Powell did note that the Fed is planning to slow the pace of its balance sheet "runoff" before long. The Fed has shrunk its bond holdings by $1.5 trillion already, and while it isn't yet done with it's "Quantitative Tightening" program, the central bank is looking for a slower, smoother transition to whatever its (undisclosed) goal for holdings may be. Since MBS reductions have fallen well short of monthly targets since QT's inception, we think all of the change in runoff will come on the Treasury side, at least to start.

Mortgage rates have eased a little after the close of the Fed meeting, and this should see them in the market for at least the next few days.

Each week in HSH's MarketTrends newsletter, we track and discuss economic conditions that affect mortgage rates and their impact on housing markets and consumers. Read the most recent edition of MarketTrends or subscribe for email delivery.

Week 30-year-Fixed 15-year-Fixed
03/21 6.870% 6.210%
03/14 6.740% 6.160%
03/07 6.880% 6.220%
02/29 6.940% 6.260%
02/22 6.900% 6.290%
02/15 6.770% 6.120%
02/08 6.640% 5.900%
02/01 6.630% 5.940%
01/25 6.690% 5.960%
01/18 6.600% 5.760%
01/11 6.660% 5.870%
01/04 6.620% 5.890%

Mortgage Choices at a Glance

Loan type/terms Fixed 30 years Fixed 15 years/
20 Years
Hybrid ARM Traditional ARM Balloon Mortgage
Rate changes
  • Never; Fully fixed for entire term
  • Never; Fully fixed for entire term
  • Usually after fixed period of 3, 5, 7 or 10 years
  • After that, annual change typical
  • Fully variable
  • Typically changing at one-year intervals
  • Some have shorter change intervals
  • Never; Fully fixed for entire term
Benefits
  • Low, stable payment
  • Usually easiest qualification
  • Stable payments
  • Builds equity faster
  • Lower total interest costs than 30-year term
  • Lower rates than fully fixed-rate mortgage
  • Can sometimes borrow larger loan amount for same income
  • Can have lowest interest rates
  • Qualification may not depend upon today's interest rate
  • Often has lower interest rate/monthly payment over balloon period than fixed rate
  • Similar to hybrid ARM
Drawbacks/Risks
  • Can have highest total interest cost over time
  • User may "buy" more rate stability than actually needed, increasing cost
  • Requires higher income to qualify
  • Less affordable monthly payment
  • Funds commited to payment cannot be used elsewhere
  • Stable payment for a number of years, then unpredictable
  • Rates can jump by as much as 6 percentage points at first adjustment
  • Payments fluctuate at each rate change
  • Unpredictable, rates can change as much as 2 percentage points at each adjustment
  • Loan fully due and payable when balloon period ends
  • Must be paid off or refinanced in unknown market conditions
Alternative strategy
  • Consider Hybrid ARM with appropriate fixed period
  • Consider 30-year term and prepaying loan to preserve cash-flow flexibility
  • Consider Fixed rate mortgage or longest possible fixed period, if loan hold period not known
  • Consider Hybrid ARM to ameliorate rate and payment risks for a given period
  • Consider Hybrid ARM to ensure continued loan availability
These may be useful for...
  • Purchasing a home
  • First-time homebuyers
  • Refinancing to improve cash flow/lower payment
  • Refinancing to lower total interest cost
  • Retiring mortgage more quickly
  • Building or rebuilding equity more quickly
  • Purchasing or refinancing when time horizon is seven years or shorter, and where borrower can handle increase in monthly payments
  • Purchasing or refinancing when interest rates are near top of cycle, and are likely to fall, or sale or refinance is anticipated within three years
  • Purchasing or refinancing when time horizon is three years or longer and home will be sold prior to end of balloon period
Consider if
  • Buying or refinancing a home and planning on owning for longer than 10 years
  • Buying second home
  • Refinancing to build equity
  • Paying off mortgage before life event (retirement, etc)
  • Buying a home and expect to move before fixed period ends, or know income will rise to offset payment risk, even in worst-case scenario
  • Buying or refinancing when income can handle frequent payment changes and worst-case scenario for rates over a four-year period
  • Buying a home and expect to move before balloon period ends, or have resources to pay off mortgage if refinance not available
When shopping, ask about
  • "Full cost" vs. "No cost" refinances, prepaying loan to shorten term if desired
  • If 20-year term makes payment too high, whether 25-year term is available
  • Interest rate caps, for first and subsequent adjustments, worst-case scenario
  • A history of the Index the loan is keyed off, margin and caps
  • Whether or not there is any built-in refinancing option when the balloon period ends
Useful tools & resources

Latest Mortgage Rate Analysis

HSH's longer-range outlook for mortgage rates, where we review our last forecast,discuss current market influences and provide our expectations for mortgage rates over the next nine weeks.

Mortgage Calculators

Mortgage rates and more

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