Mortgage charges have been on a wild trip the previous few years. In actual fact, it was nonetheless potential to acquire a 3% 30-year fastened mortgage in early 2022.
By late 2023, you could have confronted an 8% mortgage price. And at the moment, your price would possibly begin with a 5, 6, or a 7.
Volatility has reigned supreme because the Fed battles inflation and financial uncertainty makes it troublesome to determine the longer-term path of charges.
However one factor I’ve seen 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 kind of, although if you wish to get technical, there may be 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 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 truly a perk to winter in terms of mortgage charges.
And presumably looking for a house too.
I crunched the numbers going again to 1972 and located that mortgage charges are typically 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 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 variety of time to create, the 30-year fastened has averaged 7.62% within the month of February going again to 1972, per Freddie Mac.
Whereas that’s about one full proportion level greater than Freddie’s present weekly price of 6.69%, it’s the very best month on report.
The one higher month has been January, with a mean price 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 typically at their finest, aka lowest.
To benefit from this pattern, you might 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 clients if refinancing a mortgage.
This implies you possibly can snag a cheaper price on a house, or within the case of a refinance, get higher customer support and faster flip occasions.
Additionally, mortgage lenders are inclined to move on extra financial savings throughout gradual intervals. Once they’re much less busy, they should drum up enterprise so this would possibly clarify why charges are decrease.
Spring and Summer time Are the Worst Seasons for Mortgage Charges
Now we all know that winter is usually the very best season in terms of mortgage charges. However what concerning the worst?
As soon as the climate begins heating up, mortgage charges are inclined to climb as properly.
Whereas March appears to be an honest month that straddles the tip of winter and the start of spring, it will get worse from there.
The very worst months are Might and June, and April is virtually proper there with them. This additionally occurs to be when residence procuring is in full swing.
So that you get an unwelcome mixture of essentially the most competitors from different residence consumers and the very best mortgage charges (on common).
This sort of goes in opposition to shopping for a house in spring/early summer season as sellers is perhaps emboldened to face agency on worth. And lenders won’t be keen to supply reductions or negotiate a lot.
Taken collectively, you’re a presumably inflated residence gross sales worth and a better mortgage price.
The one actual upside is that there is perhaps 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 Might Differ Whatever the Season
One remaining be aware right here. Simply because mortgage charges are typically lowest in winter doesn’t imply they all the time are.
The identical is true of charges being greater in spring and summer season. There have been and can be years when the alternative is true.
For instance, the 30-year fastened 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 typically it’ll “work out” and typically it received’t. Take note of the larger developments for those who’re seeking to monitor mortgage charges.
Proper now, we seem like shifting decrease as inflation cools and the financial system appears to be like 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 dangerous 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 consumers higher navigate the house mortgage course of. Observe me on Twitter for warm takes.
