What are mortgage rates likely to do as we close out 2023 and start 2024? Check out our latest Two-Month Mortgage Rate Forecast.

What are mortgage rates likely to do as we close out 2023 and start 2024? Check out our latest Two-Month Mortgage Rate Forecast.

Today's Mortgage Rates - 12/07/2023

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A Return to Summer for Rates

It's beginning to look a lot like... August? Mortgage rates drove down to four-month lows this week.

Freddie Mac reported today that the average offered interest rate for a conforming 30-year fixed-rate mortgage decreased by nineteen basis points (0.19%) to 7.03%, a decline large enough to leave them at levels last seen in the week of August 10th.

Shorter-term fixed mortgage rates managed an even larger decline, posting a twenty-seven basis point fall, landing at 6.29%, an 18-week low. Home loans with shorter terms are most popular with homeowners looking to refinance, and even a decline of nearly three-quarters of a percentage point from this year's highs probably isn't enough to entice many homeowners to change to a shorter mortgage.

Fixed mortgage rates have retreated meaningfully in recent weeks, lessening the appeal of choosing an ARM as an alternative. Freddie Mac's legacy survey data pegs the interest for a hybrid 5/1 ARM at 6.64%, down eleven basis points (0.11%%) from last week.

As they are often kept in a lender's portfolio rather than sold to investors, rates on ARMs vary more widely from lender to lender than do fixed-rate mortgages. In contrast to Freddie's survey data, a different observation of offered rates for 5/1 ARMs -- one from the Mortgage Bankers Association's weekly applications survey -- declined barely at all, and this observation decreased by just a single basis point (0.01%) to 6.58% in the MBA's latest report.

The ongoing decline in interest rates of late is due to a combination of factors. Investors are increasingly convinced that the Fed's next move -- when it comes -- will be a cut in rates, and positions are being set to get out in front of that possibility. At the same time, recent economic data have been favorable, with softer reports on labor conditions and steadily easing inflation pressures. Technical factors --such as the change in the mix of debt being offered by the Treasury and slow mortgage originations this fall leading a relative dearth of new MBS for investors to absorb -- are also likely playing a role, too.

During active periods in the market, and often when there is considerable momentum, interest rates tend to move above (or below) the level they should be at given economic fundamentals. It seems as though interest rates overshot the mark to the upside in early-mid-fall, and may now be moving rather below where they might ought to be as inventors more fully run to the other side of the see-saw.

Just as a move one way was to the detriment of potential mortgage borrowers, the trend in this direction is to their benefit. What's unclear is how long the downdraft will persist before at least some investors start sneaking back toward the fulcrum, lifting rates again. Until then, borrowers can at least grab mortgage rates that are improved if not actually low.

Mortgage rates still seem to be easing as we write this. We'll see if they can continue the trend after the Fed meeting next week. Until then, slightly lower mortgage rates should be in the market over 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
12/07 7.030% 6.290%
11/30 7.220% 6.560%
11/22 7.290% 6.670%
11/16 7.440% 6.760%
11/09 7.500% 6.810%
11/02 7.760% 7.030%
10/26 7.790% 7.030%
10/19 7.630% 6.920%
10/12 7.570% 6.890%
10/05 7.490% 6.780%
09/28 7.310% 6.720%
09/21 7.190% 6.540%

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
  • 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
  • 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

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