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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 - 02/28/2024

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Rates Leg Higher Again

As we've noted in the last two MarketTrends newsletters, mortgage rates have been on an upward bent lately, and this week saw another sizable increase.

As reported by Freddie Mac today, the average offered interest rate for a conforming 30-year fixed-rate mortgage jumped up by thirteen basis points (0.13%), rising to 6.90%, a 10-week high. The average 30-year FRM rate has increased by more than a quarter percentage point in the last two weeks.

Shorter-term fixed mortgage rates powered higher by a larger amount. The seventeen basis point (0.17%) increase in the average offered rate for a 15-year fixed rate mortgage saw it land at 6.29%, returning to a mid-December level.

Despite higher fixed interest rates, few borrowers are taking out ARMs at the moment. The slightly wider gap between the average 30-year FRM and the initial fixed rate for a 5/1 ARM may entice a few more borrowers to consider this option, though. The Mortgage Bankers Association reported that the average offered rate for first five years of a 5/1 hybrid ARM increased by another 0.07% to 6.37% in their latest survey week. With a $300,000 loan amount, a rate differential of 53 basis points compared to a 30-year FRM could save a borrower almost $8,000 in interest cost over the first five years of the loan.

Investors have recently been resetting their expectations for the path of monetary policy, lifting market-based interest rates (and mortgage rates). January's economic reports included stronger-than-expected hiring and firmer-than-hoped inflation, making it less likely the Fed will cut rates soon, quickly or aggressively, at least for the foreseeable future. Futures markets now place only about a 25% chance of the first rate cut coming in May; however, a majority still believe that June is the likely starting point for a change in monetary policy.

Mortgage rates firming up a bit is unlikely to be welcome news to anyone who is looking to buy a home this spring. While rates are still well below their worst levels of last fall, they are considerably higher now then they were at the start of last year's spring homebuying season. As such, the typical seasonal upturn for existing home sales is likely to be more muted than normal this year. Higher mortgage rates and high home prices mean another increase in the income needed to purchase a median-priced home in the top 50 metro areas as home affordability continues to be a challenge.

With moves in underlying yields becoming a little more choppy of late, there's at least a little hope that the run-up in mortgage rates may be mostly done for now. That said, there may be a little more upward movement yet to be expressed, and slightly firmer mortgage rates seem most likely to 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
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%
12/28 6.610% 5.930%
12/21 6.670% 5.950%
12/14 6.950% 6.380%
12/07 7.030% 6.290%

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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