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Up for the quarter, down for the year? See what's happening with home affordability in our latest "Income you need to buy a home in the top 50 metro areas".

Up for the quarter, down for the year? See what's happening with home affordability in our latest "Income you need to buy a home in the top 50 metro areas".

Today's Mortgage Rates - 06/04/2023

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Amid concerns about the debt-ceiling impasse, mortgage rates bumped higher this week.

As reported by Freddie Mac, the average offered interest rate for a conforming 30-year fixed-rate mortgage increased by eighteen basis points (0.18%), lifting the average rate on the most popular mortgage to 6.57%, its loftiest level since last mid-March.

Conforming fifteen-year FRMs powered higher too, with the average offered rate for the most common short-term mortgage rising by twenty-two basis points to 5.97%, more than a six-month high.

Perhaps most reflective of the market stress, which is affecting short-term yields to a greater degree than long-term ones, Freddie Mac's legacy rate survey showed the average initial fixed rate for a hybrid 5-year ARM jumping upward by twenty-nine one-hundredths of a percentage point, (0.29%) to 6.28% for the week. This is the highest weekly rate for the most common alternative to a 30-year FRM since October 30, 2008.

With a debt-ceiling deal still nowhere to be seen and a deadline looming in just a week, interest rates across the yield curve are firming, but more so on the shorter end of the curve. There has been little fundamental change in the economic or inflation picture, but perhaps enough of a brightening as to also bring into question the expectation that the Fed will skip raising interest rates at the June meeting. This is also likely adding to the uptick in rates.

The minutes of the last Fed meeting in may were released this week, revealing that Fed members weren't exactly universal in their thinking that a pause was warranted at the upcoming get together. Since that meeting, the data hasn't suggested much by way of declines in inflation, and first-quarter GDP growth was revised upward from an initial 1.1% estimate to a now 1.3% rate, so there may have been at least a little more momentum to start the second quarter than was previously believed.

Also, the labor market may not have loosened as much as thought, either. Significant downward revisions to initial claims for unemployment benefits were released this week, resetting the trend over the last three months from one where it appeared that more folks were filing for benefits to one where there's been little appreciable change since the beginning of March.

With upward pressure on underlying yields still in place, mortgage rates are still firming a bit, and borrowers should expect them to be higher through the long Memorial Day weekend. After that, what happens with a debt-ceiling deal or no will dictate where rates go.

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
06/01 6.790% 6.180%
05/25 6.570% 5.970%
05/18 6.390% 5.750%
05/11 6.350% 5.750%
05/04 6.390% 5.760%
04/27 6.430% 5.710%
04/20 6.390% 5.760%
04/13 6.270% 5.540%
04/06 6.280% 5.640%
03/30 6.320% 5.560%
03/23 6.420% 5.680%
03/16 6.600% 5.900%

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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