Highlights from this article:
- Mortgage rates dropped again this week, sinking to a 13-month low.
- The average rate for a 30-year fixed home loan is now as 4.23%.
- Home buyers nationwide could benefit from this trend.
- Freddie Mac predicts a slight increase in rates later in 2019.
Mortgage rates have dropped quite a bit during the first part of 2019, making it a good time to buy or refinance a home for many people across the U.S.
At the end of 2018, many economists and housing analysts were predicting that mortgage rates would rise gradually throughout 2019. But so far, we’ve seen just the opposite.
Aside from a few upward “blips” along the way, mortgage rates have actually dropped steadily during the first 12 weeks of 2019. This gives home buyers a chance to lock in their mortgages at historically low rates.
Chart: 30-Year Mortgage Rates Drop in 2019
The chart below was published by Freddie Mac earlier this week. We’ve removed two of the loan categories (15-year fixed and 5-year ARM) to give you a clearer picture of what is happening. Besides, the standard 30-year fixed mortgage is by far the most popular loan type among home buyers today. So it makes sense to focus on that.
This chart extends from March 2018 (on the left) through mid-March 2019 (on the right). As you can see, the average rate for a 30-year fixed mortgage began to drop in December of last year. It has followed that downward trend for most of 2019, as well.
During the week of March 21, 2019, the average rate for a 30-year fixed mortgage dropped to 4.28%. That was its lowest level in over a year.
On March 21, Freddie Mac’s research team wrote:
“Mortgage rates have dipped quite dramatically since the start of the year and house prices continue to moderate, which should help on the homebuyer affordability front. The combination of improving affordability and more inventory than the last few spring selling seasons should lead to improved home sales demand.”
Of course, we don’t know how long rates will stay at this level. They could continue dropping into spring 2019. They could level off. Or they could turn north again. There is simply no way to predict this, long term, with complete accuracy.
Freddie Mac’s analysts recently predicted that the average rate for a 30-year fixed home loan would increase later this year, perhaps hitting 4.6% by the end of 2019. But even that would be a minor change from where we are now.
A Good Time to Buy a Home?
The above quote mentioned that home prices “continue to moderate.” That’s true for most cities across the country. We are moving away from the abnormal, above-average price gains of the past few years — and settling back into a historically “normal” rate of home-price appreciation.
But prices are still rising in most real estate markets across the country, and they are expected to continue upward for the foreseeable future.
When you combine these two factors (low mortgage rates and the prospect of rising home values and equity), you could easily make a case that now is a good time to buy a home.
Federal Reserve Decides Not to Raise Rates
Following their March 20th meeting, Federal Reserve officials said that the U.S. economy is slowing more than they previously thought. As a result, they said they will not increase the short-term federal funds rate at this time.
They also signaled that they don’t intend to raise rates for the foreseeable future.
While the Federal Reserve does not have any direct control over mortgage rates, their policies do influence investor demand within stock and bond markets. And shifting demand in those markets can affect home loan rates.
As Chris Morris wrote on Fortune.com yesterday:
“After the [Fed] announcement, the yield on the 10-year Treasury fell to its lowest level since January 2018. Mortgage rates tend to track with the 10-year Treasury, meaning they could continue to go lower in the months to come.”
Summary: In spite of forecasts that were issued last year, mortgage interest rates have thus far been dropping steadily in 2019. In fact, the average rate for a 30-year fixed home loan recently dropped to its lowest point in over a year. From an interest standpoint, now could be a good time to buy or refinance a home.