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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 - 06/09/2023

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Mortgage rates softened a little as investors consider the Fed's next move.

Freddie Mac reported today that the average offered interest rate for a conforming 30-year fixed-rate mortgage decreased by eight basis points (0.08%), trimming the average rate on the most popular mortgage to 6.71%, its first decline in a month.

Conforming fifteen-year FRMs also retreated a bit, with the average offered rate for the most common short-term mortgage falling by eleven basis points to 6.07%.

With a realistic chance that the Fed will only skip a single meeting and not embark on a longer pause, short-term rates have been more elevated of late, and also more stubborn to decline. Freddie Mac's legacy rate survey showed the average initial fixed rate for a hybrid 5-year ARM edging lower this week, but only by three one-hundredths of a percentage point (0.03%), drifting to 6.38%. This is just below last week's "all-time" record high since Freddie began tracking these products in January 2005.

The Fed meets next week to consider how to change monetary policy, if at all. For a number of weeks after the May FOMC meeting, the message from the Fed suggested that the central bank would skip raising rates at the June meeting and perhaps might pause for a longer period to consider the effects of prior rate hikes and banking stresses that became evident this spring. At the time, the sentiment was that the Fed would be more "data dependent", letting the flow of the economy dictate whether rates should be increased or not.

Since then, there has been little evidence that banking issues have stressed the wider economy, although it may take some months for this to be fully realized. That said, economic growth continues along, labor markets have yet to loosen meaningfully, and inflation remains as stubbornly high as ever, all providing reasons for the Fed to lift rates again if it should decide to do so.

To the mix of stronger economic and inflation data -- which alone tends to press interest rates higher -- word is that the Treasury will soon need to issue a considerable amount of new debt to refill the nation's cash coffers. A surge of supply of Treasury bills, notes and bonds also tends to push yields higher, and in turn, it appears as though mortgage rates can be expected to remain firm or even increase a little bit again in the coming 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
06/08 6.710% 6.070%
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%

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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