Mortgage charges have been on a wild trip the previous few years. In truth, it was nonetheless attainable to acquire a 3% 30-year mounted mortgage in early 2022.
By late 2023, you could have confronted an 8% mortgage fee. And at this time, your fee would possibly begin with a 5, 6, or a 7.
Volatility has reigned supreme because the Fed battles inflation and financial uncertainty makes it tough to determine the longer-term path of charges.
However one factor I’ve observed is that charges are inclined to carry out higher throughout sure occasions of the 12 months.
Particularly within the winter months, which within the Northern Hemisphere embody December, January, and February.
Winter Is a Traditionally Nice Season for Mortgage Charges
With out getting overly technical right here, winter runs from December 1st till the tip of February.
It’s three months roughly, although if you wish to get technical, there’s an astronomical season and a meteorological season.
Anyway, I’ll preserve it easy and give attention to the months of December, January, and February. These are your core winter months, and likewise when it tends to be coldest.
Whereas I don’t like being chilly (as I reside in Southern California), winter isn’t all unhealthy. In truth, there’s truly a perk to winter with regards to mortgage rates.
And presumably searching for a house too.
I crunched the numbers going again to 1972 and located that mortgage charges are usually lowest within the winter months.
Utilizing Freddie Mac’s Main Mortgage Market Survey (PMMS), I compiled month-to-month averages to find out if any months stood out.
And lo and behold, February has been the most effective month for mortgage charges courting again 50 years.
Mortgage Charges Have Been Lowest in February on Common Going Again 50 Years
As you may see from my chart, which took lots of time to create, the 30-year mounted has averaged 7.62% within the month of February going again to 1972, per Freddie Mac.
Whereas that’s about one full share level larger than Freddie’s present weekly fee of 6.69%, it’s the most effective month on document.
The one higher month has been January, with a median fee of seven.64%, adopted by December at 7.68%.
So what does that inform us? Effectively, that winter is the most effective season for mortgage charges! In all of the winter months, mortgage charges are usually at their finest, aka lowest.
To reap the benefits of this pattern, it’s possible you’ll wish to refinance your mortgage throughout these months and even buy a home throughout these months.
Whereas I’m not a giant fan of timing the market, there are some apparent advantages that transcend charges themselves.
There’s usually much less competitors if shopping for a house because it’s a quieter time of 12 months, and fewer different clients if refinancing a mortgage.
This implies you could possibly snag a lower cost on a house, or within the case of a refinance, get higher customer support and faster flip occasions.
Additionally, mortgage lenders tend to pass on more savings during slow periods. After they’re much less busy, they should drum up enterprise so this would possibly clarify why charges are decrease.
Spring and Summer season Are the Worst Seasons for Mortgage Charges
Now we all know that winter is usually the most effective season with regards to mortgage charges. However what in regards to the worst?
As soon as the climate begins heating up, mortgage charges are inclined to climb as properly.
Whereas March appears to be a good month that straddles the tip of winter and the start of spring, it will get worse from there.
The very worst months are Could and June, and April is virtually proper there with them. This additionally occurs to be when residence purchasing is in full swing.
So that you get an unwelcome mixture of probably the most competitors from different residence patrons and the best mortgage charges (on common).
This type of goes in opposition to shopping for a house in spring/early summer time as sellers may be emboldened to face agency on value. And lenders may not be keen to supply reductions or negotiate much.
Taken collectively, you’re a presumably inflated residence gross sales value and a better mortgage fee.
The one actual upside is that there may be extra for-sale stock to select from, which could be a plus because it’s been slim pickings for years now.
Mortgage Charges Are Unpredictable and Could Differ Whatever the Season
One ultimate word right here. Simply because mortgage charges are usually lowest in winter doesn’t imply they all the time are.
The identical is true of charges being larger in spring and summer time. There have been and might be years when the other is true.
For instance, the 30-year mounted started 2024 at round 6.60% and was as little as 6% in mid-September.
However in 2023, the 30-year bottomed at round 6% in February and peaked at almost 8% in October.
So generally it’ll “work out” and generally it received’t. Take note of the larger developments if you’re looking to track mortgage rates.
Proper now, we seem like shifting decrease as inflation cools and the economic system seems shaky.
This implies mortgage charges would possibly proceed to ease this month and subsequent, and presumably hit these lows once more in February 2025.
Simply know that there’ll all the time be surprises (presidential inauguration anybody?), and good weeks and unhealthy weeks alongside the best way.
Earlier than creating this web site, I labored as an account govt for a wholesale mortgage lender in Los Angeles. My hands-on expertise within the early 2000s impressed me to start writing about mortgages 18 years in the past to assist potential (and present) residence patrons higher navigate the house mortgage course of. Observe me on Twitter for decent takes.
