Cash News
Mortgage rates inched up this week, and they don’t show signs of dropping anytime soon.
The latest jobs report from the Bureau of Labor Statistics supports the idea that rates might not fall in the near future. The report showed that the United States added 303,000 new nonfarm jobs in March, which exceeded expectations. The unemployment rate also dropped from 3.9% in February to 3.8% in March.
Although a healthy labor market is good in many ways, it’s not necessarily great news for mortgage rates. Rates tend to be high when the U.S. economy is doing well and low when the economy is struggling. As unemployment rates decrease, mortgage rates are unlikely to fall drastically.
You probably shouldn’t hold out for any major mortgage rate changes during the spring and summer home-buying season. If you’re financially ready to buy a house, you may want to go ahead and start shopping for homes and finding the best mortgage lender rather than hold out for lower rates.
Learn more: How to get a mortgage
The average 30-year mortgage fixed rate this week is 6.88%, according to Freddie Mac. This is a six-basis-point increase from last week and just above the four-week average.
The national average 15-year fixed mortgage rate also rose this week. The 15-year rate is 6.16%, which is up 10 basis points since last week and right around the four-week average.
It probably doesn’t feel like a good time to buy a house, but it may be a better time than you think. Today’s 30-year mortgage rates are nearing 7%, which feels terrible compared to 2021 when many people could get a rate under 3%.
But keep in mind, the highest mortgage rate was 18.63% in October 1981. Suddenly, 6.88% doesn’t seem so bad, does it? It’s also extremely unlikely that rates will drop to below 3% anytime soon unless another unexpected anomaly like the COVID-19 pandemic happens again.
Also, even though house prices are high, they are growing less aggressively than they were a couple of years ago. And new-home construction is starting to pick up.
In a nutshell: It isn’t a fantastic time to buy a house. Rates are relatively high, and even though new homes are being built, there’s still a lot of room for improvement. But it’s probably a better time to buy than many people think it is. And remember, you can always lock in a rate now and refinance into a lower rate in a few years if rates decline later.
Learn more: Is it better to build or buy a house?
If you’re already a homeowner and in need of some extra money, 2024 could be a good time to get a home equity line of credit (HELOC).
A HELOC is a type of second mortgage that lets you borrow against the equity in your home. And since home values have soared in the last few years, it’s possible you’ve built up quite a bit of equity.
Unlike a home equity loan that lends you money all in one lump sum, a HELOC is a line of credit, so you can tap into it whenever you need money. And you only have to pay interest on the money you end up borrowing. If you don’t use the full line of credit, you don’t have to pay interest on the money you didn’t touch.
HELOCs usually start with lower interest rates than home equity loans. The rates are usually adjustable, meaning you risk your rate increasing later — but if rates continue to trend downward, your rate might actually end up decreasing down the road.
Dig deeper: HELOC vs. home equity loan
Still, do your homework before applying for a HELOC. Do the math, weigh the pros and cons, and talk to your lender. It can be a good time to use that money for things like home improvements that will increase your house’s value even more, but it can be risky to use the line of credit for non-essential expenses.