Mortgage charges have been on a wild journey the previous few years. In actual fact, it was nonetheless attainable to acquire a 3% 30-year mounted mortgage in early 2022.
By late 2023, you will have confronted an 8% mortgage fee. And immediately, 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 establish the longer-term route of charges.
However one factor I’ve observed is that charges are likely to carry out higher throughout sure instances of the 12 months.
Particularly within the winter months, which within the Northern Hemisphere embrace 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 top of February.
It’s three months roughly, although if you wish to get technical, there may be an astronomical season and a meteorological season.
Anyway, I’ll hold it easy and concentrate on the months of December, January, and February. These are your core winter months, and in addition when it tends to be coldest.
Whereas I don’t like being chilly (as I reside in Southern California), winter isn’t all dangerous. In actual fact, there may be really a perk to winter in relation to mortgage charges.
And probably purchasing 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 Major 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 very best 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 a whole lot 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 greater than Freddie’s present weekly fee of 6.69%, it’s the very best month on report.
The one higher month has been January, with a mean fee of seven.64%, adopted by December at 7.68%.
So what does that inform us? Effectively, that winter is the very best 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, chances are you’ll wish to refinance your mortgage throughout these months and even purchase a house 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 typically much less competitors if shopping for a house because it’s a quieter time of 12 months, and fewer different prospects if refinancing a mortgage.
This implies you possibly can snag a lower cost on a house, or within the case of a refinance, get higher customer support and faster flip instances.
Additionally, mortgage lenders are likely to move on extra financial savings throughout sluggish intervals. 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 often the very best season in relation to mortgage charges. However what in regards to the worst?
As soon as the climate begins heating up, mortgage charges are likely to climb as effectively.
Whereas March appears to be an honest month that straddles the top 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 dwelling purchasing is in full swing.
So that you get an unwelcome mixture of essentially the most competitors from different dwelling consumers and the best mortgage charges (on common).
This sort of goes towards shopping for a house in spring/early summer time as sellers is likely to be emboldened to face agency on worth. And lenders may not be keen to supply reductions or negotiate a lot.
Taken collectively, you’re taking a look at a probably inflated dwelling gross sales worth and a better mortgage fee.
The one actual upside is that there is likely to be extra for-sale stock to select from, which generally is a plus because it’s been slim pickings for years now.
Mortgage Charges Are Unpredictable and Could Range Whatever the Season
One closing word right here. Simply because mortgage charges are usually lowest in winter doesn’t imply they at all times are.
The identical is true of charges being greater in spring and summer time. There have been and will probably be years when the alternative 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 for those who’re trying to observe mortgage charges.
Proper now, we seem like transferring decrease as inflation cools and the financial system appears shaky.
This implies mortgage charges would possibly proceed to ease this month and subsequent, and probably hit these lows once more in February 2025.
Simply know that there’ll at all times be surprises (presidential inauguration anybody?), and good weeks and dangerous weeks alongside the way in which.
Earlier than creating this website, 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 current) dwelling consumers higher navigate the house mortgage course of. Observe me on Twitter for warm takes.
