The US economy added 272,000 new jobs in May, exceeding investor expectations and indicating a strong labor market. Although unemployment rose slightly from 3.9% to 4%, the Federal Reserve may not cut interest rates this summer due to the robust labor market. Mortgage rates, however, have decreased, with 30-year fixed rates falling to 7.03% and 15-year fixed rates dropping to 6.54% compared to the previous week. It is anticipated that mortgage rates will continue to decline in 2024, offering homebuyers an opportunity to secure lower rates by comparing loan offers from multiple lenders.
When choosing a mortgage, individuals should consider factors such as loan term and type. The common mortgage terms are 15 and 30 years, with fixed-rate mortgages offering stability throughout the loan duration. Adjustable-rate mortgages, on the other hand, have a fixed interest rate for a predetermined period before adjusting annually based on the market. While fixed-rate mortgages are suitable for long-term homeowners, adjustable-rate mortgages may initially offer lower interest rates. Currently, average rates for 30-year fixed mortgages stand at 7.03%, while 15-year fixed rates are at 6.54%.
For those considering a 5/1 adjustable-rate mortgage, the average rate currently stands at 6.84%. This mortgage type typically provides a lower introductory interest rate for the first five years, followed by potential adjustments based on market rates. High inflation and the Federal Reserve’s interest rate hikes in recent years have led to increased mortgage rates. Despite the central bank keeping the federal funds rate steady, mortgage rates have ranged between 6.5% and 7.5% since late last fall. The combination of elevated mortgage rates, limited housing inventory, and stagnant wage growth has contributed to decreasing affordability in the housing market.
Experts predict that mortgage rates will end the year between 6% and 6.5%, with adjustments likely depending on the Federal Reserve’s monetary policy and economic performance. Mortgage rates are influenced by various factors, including inflation, job data, market expectations, and geopolitical uncertainties. The ongoing inflation deceleration and a potential slowing economy could lead to lower mortgage rates. However, data indicating inflation risks may result in higher rates. To prepare for monthly mortgage payments, individuals can use CNET’s mortgage calculator to analyze their financial situation and make informed decisions.
To secure the best mortgage rates, homebuyers are advised to save for a larger down payment, boost their credit score, pay off debt, research loan options, and lenders, as well as compare multiple offers. While mortgage rates are currently high, saving for a down payment and improving credit scores can help individuals secure competitive rates in the future. Government-sponsored loans and assistance programs can offer more flexible borrowing requirements and support with down payments and closing costs. By researching and comparing lenders, homebuyers can find the lowest mortgage rates suitable for their financial situation.
