Will mortgage rates fall this week?

Understanding the Current Mortgage Rate Trends

Mortgage interest rates have been steadily decreasing over the past few months, marking a significant shift from their peak levels just two years ago. This decline has been gradual but consistent, with rates reaching an 11-month low in September and even dipping to their lowest point in nearly a year. These drops could continue, offering homebuyers an opportunity to enter a more favorable market. However, the question remains: will mortgage interest rates drop again this week?

What Influences Mortgage Rates?

The answer to this question depends on where you look. Average mortgage rates compiled by FreddieMac, which surveys lenders on the rates they're offering, may be slightly lower than the 6.35% rate on a 30-year mortgage term that was recorded last week. However, individual lender websites and online marketplaces that aggregate multiple rate offerings often show even lower rates. This is because lenders don’t always wait for the Federal Reserve to take formal rate-cutting measures before adjusting their own rates. To stay competitive, they may reduce rates in advance of any official Fed action.

With the CME Group's FedWatch tool indicating a near certainty of a rate cut this week, lenders might feel confident enough to make changes preemptively. That said, there is still uncertainty about the size of this week’s potential rate cut. While most expect a 25-basis-point reduction, a larger cut of 50 basis points is also possible, especially following recent disappointing unemployment data.

It's important to note that when the Fed reduced rates by a similar amount last September, mortgage interest rates dropped to a two-year low before the announcement was official. This suggests that buyers should remain vigilant this week, as rates could fall more significantly than anticipated, and the drop might not be directly tied to a formal Fed announcement.

The Unpredictable Nature of Mortgage Rates

Overall, predicting mortgage rate trends can be challenging. Last September, mortgage rates averaged just 6.15%, but by January, they had risen comfortably above 7%. This volatility means that even if rates continue to drop this week, it doesn't guarantee they'll stay low for long. Buyers should be prepared to act quickly when favorable rates appear.

The Impact of Credit Scores

Another critical factor to consider is the impact of credit scores on mortgage rates. Many of the lower rates listed on lender websites and in local bank branches are reserved for borrowers with good to excellent credit scores and clean credit histories. If you don't have these qualifications, you may not be eligible for the best rates available.

Taking the time to check your credit report is essential. This will allow you to see what lenders would see if you were to apply for a loan. Look for any inaccuracies, outdated information, or incomplete records that might be negatively affecting your score. Disputing these issues can help improve your credit standing and increase your chances of securing a better mortgage rate.

Key Takeaways

The trend of declining mortgage interest rates is likely to continue this week, potentially by a significant margin if the Federal Reserve takes more aggressive action. For buyers, this means it's a good time to shop around and seek out the lowest rates possible. However, this requires some effort, strategic timing, and an above-average credit score. Despite the challenges, with mortgage rates finally moving in a direction that benefits buyers, the extra work could be well worth it.