Mortgage Q&A: “What time of year has the lowest mortgage rates?”
We all look for angles. Especially if it will save us some money. whether the trend of the stock market house price trends or mortgage rate trends Someone always claims to unlock the code.
Unfortunately, it is often all nonsense or prediction about the belief that what happened in the past will happen again in the future.
Sometimes history repeats itself. Sometimes it doesn’t repeat itself. We may only hear it when it happens because it makes the person behind it sound like a genius.
Now, if you’re wondering if there is “Is it the best time of year to get a mortgage?” The answer is. there may be…and definitely better (and worse) than any other time.
What time of year has the lowest mortgage rates?
in fact It is very difficult to predict anything. even the weather So when it comes to complex matters like mortgage interest ratesThe success rate could be much lower.
as mentioned I intend to see if there is any trend in mortgage rates. that we can collect from the available information? Using Freddie Mac’s retrospective mortgage rates that go back to 1971.
with the age of 50 information at our fingertips You would think that some trend would appear, right?
Are mortgage rates lower during certain months or higher during others or is it just random? let’s find out
For the record, I looked at the monthly averages for 30-year fixed-rate mortgages over the past three decades to see if there were any winning months.
I omitted years back (such as the 70s and early 80s) because mortgage rates weren’t at the same level they are today.
The table above shows average monthly mortgage rates. It is newly updated using data from 2021 and 2022 to provide the latest results.
Maybe you should buy a home loan instead of a holiday gift…
It turns out There are months when mortgage rates are the lowest.. and as you would expect It was a time when most people weren’t even thinking about buying a house or refinancing their existing loan.
Yes, it’s December, you know, when people are more concerned about holiday shopping and family trips. I will call the mortgage lender.
Or when it’s too cold to think about doing something strenuous, like filling out a home loan application.
This could explain why mortgage rates are the lowest in December. If you recall, lenders pass on larger discounts to consumers. when things slow.
And December is often a slow month for mortgage lenders. This may be related to discounts seen over the past 30 years.
no big deal But mortgage rates below 0.25% can result in big savings over time.
Keep an eye on mortgage rate sales throughout the year.
- Mortgage lenders operate just like any other type of business that sells goods or merchandise.
- They price the loan based on expected profit margins and operating costs.
- If their business slows down They may tend to lower the price. (or interest rate)
- But if they do a lot of business (or too busy) they may maintain inflated rates.
Similar to other companies that sell products, there are “sales” at certain times throughout the year. and when the price is raised
as you expected If the company tries to move the product In this case, it’s a home loan. What will they do? They lower prices to drive business.
Mortgage lenders can lower prices or rates because they have a margin in their market rates.
This margin serves as their profit. minus operating costs Of course, they might not make as much money per loan if interest rates were lowered for consumers. But they can make up for the amount.
Instead of closing one of the higher priced loans They may be willing to close three loans and earn more in total. So they have some wiggle room to play with at a small rate.
They can be lowered when the business is collecting data. and just maintain or increase the level when the phone doesn’t stop ringing.
How much cheaper price can be in a given month?
- The mortgage rate is measured in eight percent (0.125%).
- This may or may not look like anything when comparing rates.
- But that small difference can be multiplied because you’ve been paying your mortgage each month for several years (up to 30!).
- This explains why even small differences in rates can be worth thousands of dollars over time.
Okay, we know rates vary throughout the year. And even small differences in rates can mean a lot. But how much can you save?
Although not very big But you might get a 0.25% lower rate in December vs. April. It’s the same in October and November compared to spring.
If we’re talking about a $300,000 loan amount, 6% versus 6.25% is a difference of about $50 per month, or almost $600 per year.
Keep your mortgage for a decade And you’ll pay almost $5,000 more during that time.
Are you overpaying for your home and house loan in April?
- The most popular time to buy a home is in the spring. This is usually April.
- This is the time when most prospective buyers are serious and make an offer.
- It is also when more home sellers finally decide to list their properties.
- But buying a home in the fall or winter might be cheaper when things are going to get in the way. proceed slowly
When talking about April That month has often been prime time for home buying in the past. which explains the lack of a discount
The same goes for buying a house in April. It’s more common to see sales in the spring than during the fall or winter.
All this begs the question. Should we buy a house when prices, competition and interest rates are the lowest? may.
The only problem – there tends to be less inventory in the fall and winter as well. But if you find something you like This might be a good time to make a decision.
in other words You should always be looking. Even if it’s not the right time to move.
if you are refinance mortgageIn December, the obstacles will be less because you already have a house.
to make the negotiations smoother Lenders may not be busy. So you will qualify for the loan much faster. And you might get a little more interest from your loan officer.
Should I wait until December to get a home loan?
In the short term maybe not. Although December has the lowest mortgage rates on average over the past 30 years, there have been several years when interest rates were higher in December compared to other months.
Take 2018, where the average 30-year constant was 4.03% in January and 4.64% in December.
The same was true for 2015 and 2016, when rates were markedly higher in December compared to the beginning of the year.
Last year was also a bad December, with the 30-year average holding steady at 3.45% in January and 6.36% in December.
However, in 2020, the 30-year constant averaged 3.31% in April and 2.68% in December. That’s a difference of 0.63%. That’s thousands of dollars in savings.
All in all, you’d be better off paying attention to what’s going on in the economy. If you want to predict the direction of mortgage rates.
A trend (up or down over a period of time) can be more important than a month of the year.
Simply put, bad economic news often leads to lower mortgage rates. While positive news tends to encourage interest rates to rise.
Any time of year you may be able to Save even more on your mortgage. Just collect quotes from more than one lender.
in the end Time doesn’t seem to be the biggest rate driver. And it’s not something we can control.
(photograph: Marco Verch)
