What You Need to Know About Mortgage Rates This Summer

Spring and summer are the hottest seasons for buying and selling homes; if you're in the market, you're likely tracking mortgage rates. Here are a few things to know about how mortgage rates are shaping up this summer.

  • Mortgage rates remain near historic lows: According to Freddie Mac's Primary Mortgage Market Survey, while average rates have crept up from all-time lows, they remain affordable for many home buyers. You can also request specific rates by requesting mortgage quotes from our network of lenders.
  • Analysts expect the Federal Reserve to raise the target federal funds rate this Fall: The Federal Reserve's Federal Open Market Committee has been eyeing a rate increase for months, but has so far abstained from raising the current target federal funds rate range of 0.00 to 0.250 percent. Financial analysts suggest that the Fed will likely raise the rate this fall; if this happens, interest rates can be expected to increase for consumer credit and home loans. While nothing is definite, this summer could be your last chance to take advantage of current low mortgage rates.
  • Mortgage rates change often and for many reasons: Realtor.com notes that mortgage rates change multiple times each day and can be affected by domestic and global financial developments including changes in housing markets, consumer confidence, and employment data. There is no sure way to predict exactly how, when, or why rates can change.
  • The best time to buy a home is when you are ready: It's easy to get caught up in chasing changing mortgage rate trends and second-guessing economic reports. While it makes sense to shop rates and do research to get the best deal you can, the best time to shop mortgage rates is when you can afford it and you're serious about buying a home. Recent college grads and newly married couples are often encouraged to buy a home right away, but there are many personal considerations for buying a home other than low interest rates and the advice of well-meaning friends and family. Investopedia reports affordability is the primary consideration; with many financial firms and analysts expecting rates to rise in coming months, buying now could potentially save thousands in interests paid over the life of your mortgage.

Mortgage Rates: More Ways to Save on Mortgage Interest

In addition to securing the lowest available mortgage rate, there are other factors that can help you save on interest paid over the life of your mortgage.

Consider a 15-year mortgage: You can potentially save thousands of dollars over the life of a 15-year loan as compared to a 30-year loan as mortgage rates are lower than for 30-year loans. While most mortgages are paid off or refinanced before the full loan term, a 15-year mortgage can help ensure that you'll pay off your mortgage faster. The trade off is that monthly payments for a 15-year mortgage are higher. Home buyers and homeowners planning to enjoy a mortgage-free retirement may benefit from a 15-year loan.

Pay additional principal on your mortgage: If you don't want to commit to higher mortgage payments, you can reduce interest paid over the life of your loan by making additional principal payments. Your mortgage debt will be paid off faster and you'll pay less interest. Most mortgage lenders permit pre-payments of principal, but check with your lender to verify that your mortgage does not include a pre-payment premium. Paying additional amounts toward your mortgage takes self-discipline, but you can always stop making pre-payments if necessary.

Planning to move in a few years? Consider an adjustable rate mortgage: Adjustable rate mortgages typically provide lower introductory fixed rates for a specific period, such as one, three, five or seven years. If you're buying a starter home and plan to move up in a few years, an adjustable rate mortgage may work for you. It's important to understand that once the introductory fixed-rate period expires, your mortgage rate can adjust according to the financial index the lender uses and also the margin (additional interest percentage) the lender uses to determine mortgage rate adjustments.

If you're unsure which type of mortgage works best for your circumstances, please consider consulting a professional financial advisor.

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