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Mortgage rates appear to have stabilized. That could be a good sign for the market, experts say.
The average 30-year fixed-rate mortgage in the U.S. fell slightly to 6.78% in the week ended Nov. 14, little changed from 6.79% the week before, according to data from Freddie Mac via the Federal Reserve .
“Even though it's higher than it has been over the course of several weeks, it's probably good news for homebuyers,” said Jessica Lautz, deputy chief economist and vice president of research at the National Association of Realtors.
“When interest rates fluctuate significantly, there is a lot of uncertainty in the market,” said Lautz.
Mortgage rates fell this fall in anticipation of the first rate cut since March 2020. But then borrowing costs rose again this month as the bond market reacted to Donald Trump's election victory.
While the president-elect has talked about lowering mortgage rates, presidents don't control home loan borrowing costs, experts say.
Instead, mortgage interest rates are closely aligned with government bond yields and are partially influenced by the development of the federal funds rate.
“They're anticipating inflationary measures, whether it's tariffs or increased government spending, the tax code … they're pricing in higher inflation,” said James Tobin, president and CEO of the National Association of Home Builders. “As the bond market responds, mortgage rates will respond as well.”
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Lower volatility could be a good sign, said Chen Zhao, chief economist at Redfin, an online real estate brokerage.
“High volatility alone drives mortgage rates even higher than Treasury yields,” Zhao said. “More stable prices also mean homebuyers don’t have to worry about what changes their budget will allow when looking for a home.”
Trump's team did not respond to a request for comment.
Don’t expect “big fluctuations” in mortgage rates
Election uncertainty contributed to a rise in mortgage rates in October. Then rates rose even more last week as the stock market and yields reacted to the election results.
The 10-year Treasury yield rose 15 basis points to close at 4.43% on Nov. 6, hitting its highest level since July, as investors bet a Trump presidency would boost economic growth and government spending. The two-year Treasury yield rose 0.073 basis points to 4.276% on the day, reaching its highest level since July 31.
But now that we have an elected president, mortgage rates are expected to gradually decline over time, Lautz said.
From a monetary policy perspective, future interest rate cuts are up in the air. Federal Reserve Chairman Jerome Powell said Thursday that strong U.S. economic growth will allow policymakers to take their time deciding how far and how quickly to cut interest rates.
If the Fed cuts interest rates further, it could put indirect downward pressure on mortgage rates, according to NAHB chief economist Robert Dietz.
“However, improved growth expectations would lead to higher interest rates, as would larger government deficits,” he said.
Experts say mortgage rates could take a “bumpy” or “volatile” path next year.
“I don’t think there will be big fluctuations up to the 5 percent range,” said Lautz. “We expect interest rates to be in the 6% range by 2025,” she said.
How buyers, sellers and homeowners can benefit
Trending lower prices can present an opportunity for buyers who have been house hunting for some time, especially as the winter season begins. Competition tends to decrease during the winter months, in part because homebuyers with children are in the middle of school year and are hesitant to move, Lautz explained.
We expect interest rates to be in the 6% range by 2025.
Jessica Lautz
Jessica Lautz, deputy chief economist and vice president of research at the National Association of Realtors
Current homeowners can also benefit from cheaper rates.
For example, if you bought your home this time last year when mortgage rates peaked at around 8%, you could benefit from a mortgage refinance, Lautz said.
It “makes sense” to consider refinancing if interest rates have fallen one to two points since you took out the loan, Jeff Ostrowski, real estate expert at Bankrate.com, told CNBC after the Fed's first rate cut this fall.
Remember that a loan refinance is not free; There may be associated costs such as closing costs, an appraisal and title insurance. While the overall cost depends on your region, refinancing will cost between 2% and 6% of the loan amount, Jacob Channel, an economist at LendingTree, said at the time.
If you're considering refinancing or not, look at interest rates, contact lenders and see if refinancing makes sense for you, experts say.
Homeowners have generated record home equity. According to CoreLogic, U.S. homeowners with mortgages have over $17.6 trillion in net equity as of the second quarter of 2024. Home equity increased by $1.3 trillion in the second quarter of this year, a year-over-year growth of 8.0%.
If you want to sell your current property, you may be able to counteract the slightly higher borrowing costs of your next property by making a larger down payment, says Lautz.