If you’re like most people who are paying off a mortgage or looking to buy or sell a home, chances are you pay attention to where mortgage rates are heading. Mortgage interest rates directly affect your monthly payments and the cost of owning a home long-term. When interest rates are low, it might be a good time to think about refinancing if it would sufficiently reduce your monthly paymen𝓡ts. Low rates can also present a good time to buy or sell. Buyers can secure a mortgage at a low rate, while sellers can benefit from the competitive market.

Why Mortgage Rate Change

Average interest rates for mortgages reached a 23-year peak of nearly 8.00% in October 2023, but those rates have been coming down in 2024. When 澳洲幸运5开奖号码历史查询:mortgage rates reached their high point, the federal funds rate had been at a two-decade high after 11 increases from March 2022 through July 2023 in an effort to bring down inflation. However, in September 2024, the Fed 澳洲🎀幸运5开奖号码历史查询:cut rates for the first time since 2020, reducing them by 50 basis points to a range of 4.75%–5.00%.

While the Fed doesn’t directly set mortgage rates, it does set the 澳洲幸运5开奖号码历史查询:federal funds rate. This is the rate at which banks lend money to one another. Changes to the federal funds rate can affect changes in bond yields, which in🎐 turn influences mortgage rates. Further rate cuts would bring mortga🌃ge rates even lower.

Using a mortgage calculator is a good way to compare these costs.

If Mortgage Rates Drop

If you have an 澳洲幸运5开奖号码历史查询:adjustable-rate mortgage (ARM) and rates fall or remain the same, you may want to consider refinancing with a 澳洲幸运5开奖号码历史查询:fixed-rate loan to take the stress out of worrying about rising rates in the years to come. Interest rates for ARMs, also known as variable-rate mortgages, are lower initially than fixed-rate loans for a given period—five years, for example. After the introductory period ends, rates rise according to market indexes, eventually surpassing the rate for fixed-rate loans.

If you have a fixed-rate loan and rates fall, it may be worth looking at refinancing it into a shorter-term loan. For example, if you have 20 years left on a 30-year mortgage, it may make sense to refinance the remaining 20 years into a new 15-year mortgage. Rates on 15-year mortgages are also lower than 30-year mortgages. Combine that with a rate drop, and you could save on the amount of interest paid and pay off🐭 your mortgag𓆉e sooner.

When refinancing, always consider your unique set of circumstances. Factor in 澳洲幸运5开奖号码历史查询:closing costs and how long it will take to realize the cost benefits. How long, for example, do you plan to live in your home before selling? Will you break even before you plan to sell? Generally speaking, the larger the outstanding mortgage, the more impact lower rates can have on your monthly payments. You might consider if a 澳洲幸运5开奖号码历史查询:variable- or fixed-rate mortgage is a better option.  

And, of course, lower rates mean you 🐓can afford more house—and more people can afford your house—so it can be a goꦆod time to buy or sell a home.

Rising Mortgage Rates

When rates rise and you have a low-interest fixed-rate mortgage and are not looking to sell or buy, you can happily stay the course and sleep well at night. But if you need a larger home or have to relocate, keep in mind the long-term view that, historically, home values have kept up with 澳洲幸运5开奖号码历史查询:inflation. In addition, as inflation rises, your 澳洲幸运5开奖号码历史查询:♊mortgage payments on a fixed-rate loa🍎n remain the same.

Also, consider that median prices for homes have risen post-recession. If the value of your home has gone up, so has 澳洲幸运5开奖号码历史查询:your equity. Equity is the amount of the home you own minus the outstanding loan balance. In a rising-interest-rate environment, you might want to reconsider whether now is a good time to rඣefinance your mortgage.

A 10% rise in value on a $300,000 home means $30,000 more in your pocket when you sell. This can help with putting down a larger 澳洲幸运5开奖号码历史查询:down payment when you buy your next home and help offset higher interest rates by lowering 🦄your monthly payment.

While a rising-interest-rate environment isn’t ideal for buying and selling, if it comes with more equity, ﷺthat e🅰xtra money can help cancel out the effect of higher interest rates. 

The Bottom Line

The consensus is that interest rates in 2024 and beyond will continue to decline, as the Federal Reserve has indicated it wishes to lower its benchmark rate. However, economic conditions can change, so the Fed's actions are never fully predictable. If you are looking to buy or refinance, it always is best to speak with a financial professional to discuss your best options, including whether you should act now or wait.