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The average 30-year fixed mortgage rate is up for the fifth week in a row, according to Freddie Mac. This is also the third straight week the 30-year rate has been over 7% and the highest it’s been since late November.
Because the Fed opted not to cut the federal funds rate at its meeting this week, a slight increase isn’t surprising. So now the question is: Should you buy a house during the spring and summer home-buying season, or should you wait for rates to drop?
We’re unlikely to see significant rate drops until autumn at the earliest. If your main priority is a low rate, you may want to hold off buying and use the next six months to a year to save more money, improve your credit score, or pay down debt so you can get an even lower mortgage rate later.
But if you’re otherwise ready to buy a house, you may decide you want to go ahead and buy soon — and that’s fine. Remember, you could have the opportunity to refinance your mortgage and lock in a lower rate in a few years.
Learn more: The credit score needed to buy a house in 2024
Current mortgage rates
Mortgage rates are up across the board this week, though the increases aren’t too drastic. The national average 30-year mortgage rate is 7.22%, which is five basis points higher than last week and 83 points higher than in early May 2023.
The average 15-year mortgage rate is 6.47%. This is three basis points higher than last week and up 71 points since this time last year.
How mortgage interest rates work
A mortgage interest rate is a fee for borrowing money from your lender, expressed as a percentage. You can choose from two types of rates: fixed or adjustable.
A fixed-rate mortgage locks in your rate for the entire life of your loan. For example, if you get a 30-year mortgage with a 7% interest rate, your rate will stay at 7% for the entire 30 years unless you refinance or sell.
An adjustable-rate mortgage locks in your rate for a predetermined amount of time and then changes it periodically. Let’s say you get a 7/1 ARM with an introductory rate of 6%. Your rate would be 6% for the first seven years, then the rate would increase or decrease once per year for the last 23 years of your term. Whether your rate goes up or down depends on several factors, such as the economy and housing market.
At the beginning of your mortgage term, most of your monthly payment goes toward interest. Your monthly payment toward mortgage principal and interest stays the same throughout the years — however, less and less of your payment goes toward interest, and more goes toward the mortgage principal or the amount you originally borrowed.
Learn more: 5 strategies to get the lowest mortgage rates
Which mortgage term length should you get?
A 30-year fixed-rate mortgage is a good choice if you want a lower mortgage payment and the predictability that comes with having a fixed rate. Just know that your rate will be higher than if you choose a shorter term and will result in paying significantly more in interest over the years.
You might like a 15-year fixed-rate mortgage if you want to pay off your home loan quickly and save money on interest. These shorter terms come with lower interest rates, and since you’re cutting your repayment time in half, you’ll save a lot in interest in the long run. But you’ll need to be sure you can comfortably afford the higher monthly payments that come with 15-year terms.
Read more: How to decide between a 15-year and 30-year fixed-rate mortgage
An adjustable-rate mortgage could be good if you plan to sell before the introductory rate period ends. Adjustable rates usually start lower than fixed rates, but there’s always the chance that the rate will increase once the rate-lock period is over. But if you get a 10/1 ARM, for example, and plan to sell before the 10-year period is up, you get to enjoy a lower rate and monthly payment without worrying about your rate increasing later.
Expert predictions for mortgage rates in 2024
In Fannie Mae’s latest rate forecast, the government-sponsored enterprise said it expects 30-year fixed rates to end 2024 at 6.4%. Even though national average rates have gone up over the past several weeks, Fannie Mae’s prediction for Q4 2024 hasn’t changed since its March forecast.
When the Federal Reserve lowers the federal funds rate, mortgage rates typically go down in response. However, according to the CME FedWatch Tool, there’s roughly an 85% chance that the Fed will not lower its rate at the central bank’s next meeting in mid-June. So we probably won’t see significant changes anytime soon. If you’re ready to buy a house but holding out for rates to plummet first, it might not be worth the wait.
Learn more: What the Fed rate decision means for bank accounts, CDs, loans, and credit cards