Mortgage Rate Volatility Is Normal
Data from Freddie Mac shows the recent volatility. After trending down for well over a year, there was a rise this month (see graph below):
While it’s easy to be distracted by the changes, here’s what you need to remember.
It’s normal for rates to bounce around a bit here and there. For example, if you look back at the graph, you’ll see that even within the past year there have been times like this when rates inched up. We’re in one of those moments right now and you need to be aware of that.
Especially when there’s economic uncertainty or big global events happening, volatility like this is expected. As Investopedia explains:
“Mortgage rates don’t move in isolation. When global events inject uncertainty into financial markets . . . that can ripple through to borrowing . . . mortgage costs can respond quickly to geopolitical developments. As long as uncertainty remains elevated, rate swings may continue.”
And that’s one of the reasons why trying to time the market isn’t a wise move.
You can’t control what happens with mortgage rates. But there are still things you can do to help you get the best rate possible in today’s market. And here’s where to focus your effort.
Your Credit Score
Your credit score plays a big role in the rate you qualify for. Even a small improvement can make a noticeable difference in your monthly payment. As Bankrate puts it:
“Your credit score is one of the most important factors lenders consider when you apply for a mortgage. Not just to qualify for the loan itself, but for the conditions: Typically, the higher your score, the lower the interest rates and better terms you’ll qualify for.”
So, make sure you do what you can to keep your credit score up. If you’re not sure what your score is or how you can improve it, talk to a trusted loan officer.
Your Loan Type
There are also different types of home loans – and each one can have unique requirements, benefits, and rates for qualified buyers. The Consumer Financial Protection Bureau (CFPB) explains:
“There are several broad categories of mortgage loans, such as conventional, FHA, USDA, and VA loans. Lenders decide which products to offer, and loan types have different eligibility requirements. Rates can be significantly different depending on what loan type you choose.”
That’s why it’s so important to explore your options with a lender. You may even want to talk to multiple lenders to see how the options vary.
Your Loan Term
The length of your loan matters too. Most lenders typically offer 15, 20, or 30-year loans. Freddie Mac offers this advice:
“When choosing the right home loan for you, it’s important to consider the loan term, which is the length of time it will take you to repay your loan before you fully own your home. Your loan term will affect your interest rate, monthly payment, and the total amount of interest you will pay over the life of the loan.”
Again, to figure out what makes the most sense for your budget and long-term goals, have a lender walk you through all your options.
Bottom Line
Thinking about buying right now? The best advice is to accept that you can’t control where rates are going to go from here.
What you can do is work with a trusted lender and take steps that’ll help you get the best rate possible.
So, if you want to move today, let's make it happen. We just need to control the controllables and focus where it counts.
