Mortgage charges have been on a wild trip the previous few years. In reality, it was nonetheless attainable to acquire a 3% 30-year mounted mortgage in early 2022.
By late 2023, you’ll have confronted an 8% mortgage fee. And right this moment, your fee may begin with a 5, 6, or a 7.
Volatility has reigned supreme because the Fed battles inflation and financial uncertainty makes it tough 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 instances of the yr.
Specifically within the winter months, which within the Northern Hemisphere embrace 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 roughly, although if you wish to get technical, there’s an astronomical season and a meteorological season.
Anyway, I’ll preserve it easy and concentrate on the months of December, January, and February. These are your core winter months, and likewise when it tends to be coldest.
Whereas I don’t like being chilly (as I reside in Southern California), winter isn’t all unhealthy. In reality, there’s really a perk to winter in the case of mortgage rates.
And probably 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 perfect month for mortgage charges relationship again 50 years.
Mortgage Charges Have Been Lowest in February on Common Going Again 50 Years
As you possibly can see from my chart, which took plenty of time to create, the 30-year mounted 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 fee of 6.69%, it’s the perfect month on file.
The one higher month has been January, with a median fee of seven.64%, adopted by December at 7.68%.
So what does that inform us? Effectively, that winter is the perfect season for mortgage charges! In all of the winter months, mortgage charges are typically at their greatest, aka lowest.
To reap the benefits of this development, you might need to refinance your mortgage throughout these months and even buy a home 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 yr, and fewer different clients if refinancing a mortgage.
This implies you might snag a cheaper price on a house, or within the case of a refinance, get higher customer support and faster flip instances.
Additionally, mortgage lenders tend to pass on more savings during slow periods. After they’re much less busy, they should drum up enterprise so this may clarify why charges are decrease.
Spring and Summer season Are the Worst Seasons for Mortgage Charges
Now we all know that winter is often the perfect season in the case of mortgage charges. However what in regards to the worst?
As soon as the climate begins heating up, mortgage charges are inclined to climb as effectively.
Whereas March appears to be a good month that straddles the tip of winter and the start of spring, it will get worse from there.
The very worst months are Could and June, and April is virtually proper there with them. This additionally occurs to be when residence buying is in full swing.
So that you get an unwelcome mixture of probably the most competitors from different residence patrons and the best mortgage charges (on common).
This sort of goes towards shopping for a house in spring/early summer season as sellers is likely to be emboldened to face agency on value. And lenders won’t be prepared to supply reductions or negotiate much.
Taken collectively, you’re a probably inflated residence gross sales value and a better mortgage fee.
The one actual upside is that there is likely to be extra for-sale stock to select from, which is usually a plus because it’s been slim pickings for years now.
Mortgage Charges Are Unpredictable and Could Differ Whatever the Season
One last notice 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 shall be years when the alternative is true.
For instance, the 30-year mounted 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 practically 8% in October.
So typically it’ll “work out” and typically it gained’t. Take note of the larger traits if you’re looking to track mortgage rates.
Proper now, we seem like transferring decrease as inflation cools and the financial system appears shaky.
This implies mortgage charges may proceed to ease this month and subsequent, and probably 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 unhealthy weeks alongside the best way.
Earlier than creating this website, 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 current) residence patrons higher navigate the house mortgage course of. Observe me on Twitter for decent takes.
