The average 30-year fixed mortgage rate is inching closer and closer to 7%, according to Freddie Mac. This is the third week in a row that the 30-year rate has gone up.
Economists do expect rates to gradually decrease this year, though. Fannie Mae’s latest forecast predicts the average 30-year rate will be at 6.4% by the end of 2024, while the Mortgage Bankers Association predicts it will go down to 6.1%. While these may not be the groundbreaking drops potential home buyers had been hoping for, these reports are still signs that rates will probably go down overall this year rather than continue to increase.
You could potentially save roughly half a percentage point by waiting until later in the year to buy. Consider whether you’re willing to hold off buying to snag that lower rate. If you’re in no rush, you could use this year to save more for a down payment and improve your credit score while you wait for rates to drop — the stronger your finances, the better your rate should be. But if you’re ready to buy now, know that rates probably won’t plummet anytime soon. You might decide it’s worth it to start your home-buying journey sooner rather than later.
Learn more: Best mortgage lenders for first-time buyers
Today’s mortgage rates
Although rates didn’t rise by much, both 30-year and 15-year mortgage rates are up this week. The national average 30-year mortgage rate is 6.88%, which is six basis points higher than this time last week.
The average 15-year mortgage rate is 6.16%. This is 10 basis points higher than last week.
30-year fixed mortgage rates: Pros and cons
There are two main advantages to a 30-year fixed mortgage: Your payments are lower, and your monthly payments are predictable.
A 30-year fixed-rate mortgage has relatively low monthly payments because you’re spreading your repayment out over a longer period of time than with, say, a 15-year mortgage. Your payments are predictable because, unlike with an adjustable-rate mortgage (ARM), your rate isn’t going to change from year to year. Most years, the only things that might affect your monthly payment are any changes to your homeowners insurance or property taxes.
The main disadvantage to 30-year fixed mortgage rates is interest — both in the short and long term.
A 30-year fixed term comes with a higher rate than a shorter fixed term, and it’s higher than the intro rate to a 30-year ARM. The higher your rate, the higher your monthly payment. You’ll also pay much more in interest over the life of your loan due to both the higher rate and the longer term.
Learn more: How to get the lowest mortgage rates
15-year fixed mortgage rates: Pros and cons
The pros and cons of 15-year fixed mortgage rates are basically swapped from the 30-year rates. Yes, your monthly payments will still be predictable, but another advantage is that shorter terms come with lower interest rates. Not to mention, you’ll pay off your mortgage 15 years sooner. So you’ll save potentially hundreds of thousands of dollars in interest over the course of your loan.
However, because you’re paying off the same amount in half the time, your monthly payments will be higher than if you choose a 30-year term.
Adjustable mortgage rates: Pros and cons
Adjustable-rate mortgages lock in your rate for a predetermined amount of time and then change periodically. For example, with a 5/1 ARM, your rate stays the same for the first five years and then goes up or down once per year for the remaining 25 years.
The main advantage is that the introductory rate is usually lower than what you’ll get with a 30-year fixed rate, so your monthly payments will be lower.
However, you have no idea what mortgage rates will be like once the intro-rate period ends, so you risk your rate increasing later. This could ultimately end up costing more, and your monthly payments are unpredictable from year to year.
But if you plan to move before the intro-rate period is over, you could reap the benefits of a low rate without risking a rate increase down the road.
Is now a good time to buy a house?
It might not feel like a good time to buy a house. Right now, 30-year rates are roughly in the 7% range, which looks terrible compared to 2021, when you could lock in a rate at 3% or lower.
It might be a better time to buy than you’d expect, though. The highest mortgage rate on record was 18.63% in October 2021, which makes a 6.88% rate not seem so bad. It’s also very unlikely that rates will drop to below 3% again anytime soon, unless an unexpected event like the COVID-19 pandemic happens again.
And even though house prices are high, they are growing less rapidly than they were a couple of years ago. And new-home construction is starting to pick up.
To sum it up, it’s still not the best time to buy a house. Rates are relatively high, and even though new homes are being built, there’s still a lot of room for improvement. But it’s probably a better time to buy than many people think it is.
Learn more: Is it better to build or buy a house?