Mortgage charges have been on a wild journey the previous few years. In actual fact, it was nonetheless potential to acquire a 3% 30-year fastened mortgage in early 2022.
By late 2023, you’ll have confronted an 8% mortgage charge. And at present, your charge may begin with a 5, 6, or a 7.
Volatility has reigned supreme because the Fed battles inflation and financial uncertainty makes it troublesome 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.
Particularly 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 top of February.
It’s three months roughly, although if you wish to get technical, there may be an astronomical season and a meteorological season.
Anyway, I’ll hold it easy and deal with 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 dangerous. In actual fact, there may be really a perk to winter relating to mortgage charges.
And probably searching for a house too.
I crunched the numbers going again to 1972 and located that mortgage charges are usually lowest within the winter months.
Utilizing Freddie Mac’s Major 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 very best month for mortgage charges courting again 50 years.
Mortgage Charges Have Been Lowest in February on Common Going Again 50 Years
As you’ll be able to see from my chart, which took a whole lot of time to create, the 30-year fastened has averaged 7.62% within the month of February going again to 1972, per Freddie Mac.
Whereas that’s about one full share level greater than Freddie’s present weekly charge of 6.69%, it’s the very best month on file.
The one higher month has been January, with a median charge of seven.64%, adopted by December at 7.68%.
So what does that inform us? Properly, that winter is the very best season for mortgage charges! In all of the winter months, mortgage charges are usually at their greatest, aka lowest.
To reap the benefits of this pattern, you could need to refinance your mortgage throughout these months and even purchase a house throughout these months.
Whereas I’m not an enormous 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 prospects if refinancing a mortgage.
This implies you can 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 are inclined to go on extra financial savings throughout sluggish intervals. Once they’re much less busy, they should drum up enterprise so this may clarify why charges are decrease.
Spring and Summer time Are the Worst Seasons for Mortgage Charges
Now we all know that winter is often the very best season relating to mortgage charges. However what concerning the worst?
As soon as the climate begins heating up, mortgage charges are inclined to climb as effectively.
Whereas March appears to be an honest month that straddles the top 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 house procuring is in full swing.
So that you get an unwelcome mixture of probably the most competitors from different house patrons and the very best mortgage charges (on common).
This type of goes towards shopping for a house in spring/early summer time as sellers is perhaps emboldened to face agency on value. And lenders won’t be prepared to supply reductions or negotiate a lot.
Taken collectively, you’re a probably inflated house gross sales value and the next mortgage charge.
The one actual upside is that there is perhaps 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 Range Whatever the Season
One last notice right here. Simply because mortgage charges are usually lowest in winter doesn’t imply they all the time are.
The identical is true of charges being greater in spring and summer time. There have been and shall be years when the other is true.
For instance, the 30-year fastened 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 received’t. Take note of the larger tendencies if you happen to’re seeking to monitor mortgage charges.
Proper now, we look 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 dangerous 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 present) house patrons higher navigate the house mortgage course of. Observe me on Twitter for decent takes.
