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Thinking about buying a home this spring? You'll want to check out the latest update to the income needed to buy a median-priced home in the top 50 metro areas.

Thinking about buying a home this spring? You'll want to check out the latest update to the income needed to buy a median-priced home in the top 50 metro areas.

Today's Mortgage Rates - 02/21/2024

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No Love For Rates

It may be Valentine's Day, but it's a fair bet that few will have any love for this week's mortgage rates.

Freddie Mac today that the average offered interest rate for a conforming 30-year fixed-rate mortgage jumped up by thirteen basis points (0.13%), flaring higher to 6.77%, a nine-week high.

Shorter-term fixed mortgage rates also kicked upward, but by a larger amount. The twenty-two basis point (0.22%) increase in the average offered rate for a 15-year fixed rate mortgage pushed it back up to 6.12%. It's the first time this rate has been over the six percent mark since early-mid December.

When there's a wide enough interest rate gap, a hybrid 5/1 ARM may make a useful (if temporary) replacement for a long-term fixed rate mortgage. However, that was somewhat less the case this week, as the Mortgage Bankers Association reported that the average offered rate for first five years of a 5/1 hybrid ARM increased by 0.16% to 6.30% in their latest survey week.

The Fed has been working to dissuade investors that a rate cut is coming in March, a change which futures markets now give a less than 10 percent chance of occurring. However, there's starting to be some worry that an expected May cut in the federal funds rate may not be coming either, as the inflation data out this week shifted in the wrong direction, at least for January. The Consumer Price Index for January came with a higher-than-expected 0.3% increase and core CPI with a 0.4% rise, slowing or stalling progress towards the Fed's goal for inflation.

Inflation not retreating as expected would tend to delay the timing of the first cut in rates and potentially even see them come at a slower pace than investors have been expecting.

Firmer prices were also seen in the monthly report covering import and export costs. After three months of consecutive declines, import prices rose by a much higher than forecast 0.8% for January. Costs for exports followed the same recent pattern and also increased by 0.8%. The Fed has alluded to the possibility that the beneficial effects of falling goods prices from healing supply chains may be coming to an end, and this could be the first signs of it.

If the inflation story is changing a bit, so too must interest rates, which have been betting on a steady retreat for prices. Without that positive trend still occurring, interest rates and mortgage rates have some space to rise, and it appears we'll be seeing somewhat higher mortgage rates in the market again over the coming 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
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%
12/28 6.610% 5.930%
12/21 6.670% 5.950%
12/14 6.950% 6.380%
12/07 7.030% 6.290%
11/30 7.220% 6.560%

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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