Rates Trending Downward

Written by Posted On Thursday, 07 December 2023 00:00

Freddie Mac publishes a weekly mortgage rate survey. For rate followers and maybe those who are thinking of refinancing or wanting to buy a home with a lower rate, this is good news. According to the most recent survey, the average 30 year fixed rate was around 7.29%. This is just about the same rate as we saw last September. Not a big move, but a move nonetheless. Why this trend? 

Mostly it’s due to the relatively tame inflation data we’ve received. While the rate of inflation is still rising, it’s not rising as fast as it used to. I guess that’s somewhat good news. What does this mean for you?

Really not very much. While lower, we’re not lower by much. And with the relatively stable economic data, nothing really points to a ‘gung ho’ economy down the road. Instead, it’s just steady as she goes. At the same time, the Federal Housing Finance Agency announced the new conforming loan limits for 2024 to be $766,550, an increase of $40,350 from this year’s limit 2023.

So while rates have been trending slightly lower, conforming loan limits have risen slightly. This obviously increases someone’s borrowing power. Loan amounts above these limits are categorized into the ‘jumbo’ market.  30 year fixed jumbo rates are in the 7.75% range.

This does mean a couple of things. One, for those who have been having trouble qualifying due to debt to income ratios, this slight decrease might indeed help. Note, debt ratio allowances can be affected by down payment, credit score and other compensating factors. 

If you’ve been told you’ll need to either find more income or borrow a lesser amount, this slight change may make a real difference, especially so if you last applied for a preapproval and just didn’t quite make the cut. A slightly lower rate won’t help those overcome debt ratios too high that are too high, but can for those who are just almost there.

Okay, so what do you do? I don’t typically give advice on when to lock and when not to lock and I’m not going to do that here. It’s possible that if you do lock today’s rate, you’ll be protected if rates move up. Sometimes rates can move up to the point where you no longer qualify. On the other hand, if you decide not to lock, rates might very well go down. 

The only answer to this question would be, ‘Which way would you rather be wrong by locking in now or waiting. The conservative approach would be to lock. If rates go down after you lock, say by more than 0.25% or more, your lender might allow for a ‘float down’ and let you have the lower market rate.

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David Reed

David Reed (Austin, TX) is the author of Mortgages 101, Mortgage Confidential, Your Successful Career as a Mortgage Broker , The Real Estate Investor's Guide to Financing, Your Guide to VA Loans and Decoding the New Mortgage Market. As a Senior Loan Officer and Mortgage Executive he closed more than 2,000 mortgage loans over the course of more than 20 years in commercial and residential mortgage lending. 

He has appeared on CNN, CNBC, Fox Business, Fox and Friends and the Today In New York show. His advice has appeared in the New York Times, Parade Magazine, Washington Post and Kiplinger's as well as in newspapers and magazines throughout the country. 

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