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Mortgage rates appear to have stabilized. Experts say this could be a good signal for the market.
The average 30-year fixed-rate mortgage in the U.S. fell slightly to 6.78% for the week ending Nov. 14, little changed from 6.79% the week before, according to Freddie Mac data via the Federal Reserve.
“Even though it's higher than it has been for several weeks, it's probably good news for homebuyers,” said Jessica Lautz, deputy chief economist and vice president of research for the National Association of Realtors.
“When prices move a lot, it creates a lot of uncertainty in the market,” Lautz said.
Mortgage rates fell this fall in anticipation of the first rate cut since March 2020. But then borrowing costs jumped again this month as the bond market reacted to Donald Trump's election win.
While the president-elect has talked about lowering mortgage interest rates, experts say presidents have no control over the borrowing costs for home loans.
Instead, mortgage rates track Treasury yields closely and are partly affected by what happens with the federal funds rate.
“They're anticipating inflationary policies, whether it's tariffs or increased government spending, or the tax bill… They're anticipating more inflation,” said James Tobin, president and CEO of the National Association of Home Builders. “As the bond market reacts, mortgage rates will react as well.”
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Lower volatility could be a good sign, said Chen Zhao, chief economist at online real estate brokerage Redfin.
“Higher volatility by itself actually pushes mortgage interest rates higher than Treasury yields,” Zhao said. “More stable rates also mean that homebuyers don't have to worry during their home search about what their budget allows to change.”
Trump's team did not respond to a request for comment.
Don't expect “large fluctuations” in mortgage rates
Election uncertainty contributed to an upward swing in mortgage rates during October. Then interest rates rose further last week as the stock market and yields reacted to the election results.
The 10-year Treasury yield jumped 15 basis points on November 6, closing at 4.43%, reaching its highest level since July, as investors bet that a Trump presidency will increase economic growth, along with fiscal spending. The yield on the two-year Treasury note rose 0.073 basis points to 4.276% on the day, reaching its highest level since July 31.
But now that we have a president-elect, mortgage interest rates are expected to gradually decline over time, Lautz said.
From a monetary policy perspective, future interest rate cuts remain on the horizon. Federal Reserve Chairman Jerome Powell said Thursday that strong economic growth in the United States will allow policymakers to take their time in determining how far and how quickly to cut interest rates.
If the Fed continues to ease the federal funds rate, that could provide indirect downward pressure on mortgage rates, according to NAHB chief economist Robert Dietz.
“However, improving growth prospects will lead to higher interest rates, as well as larger government deficits,” he added.
Experts say mortgage rates could be headed for a “bumpy” or “volatile” path over the next year.
“I don't think there will be any major fluctuations in the 5% range,” Lautz said. “Our forecast is that rates will be in the 6% range as we move into 2025,” she said.
How buyers, sellers and homeowners can benefit
Prices that are trending down can present an opportunity for buyers who have been searching for a home for a while, especially as winter begins. Competition tends to slow in the winter months in part because homebuyers with children are in the middle of their school year and hesitant to move, Lauts said.
Our forecast is that rates will be in the 6% range as we move into 2025.
Jessica Lauts
Jessica Lautz, deputy chief economist and vice president of research for the National Association of Realtors
Existing homeowners can also make the most of lower rates.
For example, if you bought your home around this time last year, when mortgage rates peaked at about 8%, you might benefit from mortgage refinancing, Lauts said.
Jeff Ostrovsky, a housing expert at Bankrate.com, told CNBC after the Fed's first rate cut this fall that it “makes sense” to consider refinancing if interest rates have fallen by a point or two since you took out the loan.
Remember, refinancing a loan is not free; You may incur associated costs such as closing costs, appraisal, and title insurance. While the total cost will depend on your area, refinancing will cost between 2% and 6% of the loan amount, Jacob Channel, an economist at LendingTree, said at the time.
If you're considering whether or not to refinance, look at what's happening with rates, reach out to lenders and see if refinancing makes sense for you, experts say.
Homeowners have received record equity. U.S. homeowners with mortgages have net homeowner's equity of more than $17.6 trillion in the second quarter of 2024, according to CoreLogic. Home equity in the second quarter of this year rose by $1.3 trillion, an 8.0% increase from the previous year.
If you're looking to sell your current home, you may be able to offset slightly higher borrowing costs on your next property by making a larger down payment, Lautz said.
