Perspective can be a vague concept. Defined as “a particular attitude toward or way of regarding something; a point of view,” it is shaped by our personal experiences and influenced by people, world events and a host of external factors. Home buyers are thinking mortgage rates in 2024 are high in the six-point-something range and wondering if they will go down over the course of this year.
Mortgage Rates: The Past 50 years Compared to 2024
Let’s add some perspective. Throughout the 1970s and 1980s, mortgage rates fluctuated between 7.3% and 9.78%. In 1990, according to one trade group, 3.29 million previously owned single-family homes sold. Interest for a 30-year fixed-rate mortgage was 9.97%, down from 10.25%, 10.38% and 10.40% the previous three years, respectively. In October of 1981, rates hit a whopping 18.6%.
Moving forward 20 years, the National Association of Realtors reports that 4.9 million existing single-family homes sold in 2010, and the average mortgage interest rate at the beginning of 2010 was 5.9%. The ensuing years have seen rates oscillate between 6.4% and 3.7% for a 30-year fixed rate mortgage.
Why Mortgage Rates Sway Over Time
As many, or more, factors that impact and form one’s individual “perspective” on various topics contribute to swaying mortgage rates. What the “Feds” do or do not do may not directly alter mortgage rates. The Federal Reserve System, or Fed, supervises, monitors and regulates financial institutions to promote financial and monetary stability. But, of course, there are consequences from its actions that do filter down to interest rates for all kinds of borrowing.
15 or 30 Year Mortgage Rate?
While we cannot control big things like inflation, natural disasters and the jobs report, home buyers do have some flexibility in establishing their own mortgage rate and paying down the principal early. The figures cited above are for the ubiquitous, 30-year, fixed-rate mortgage. According to the Federal Home Loan Mortgage Corporation, aka Freddie Mac, 90% of home buyers opt for the 30-year, fixed-rate mortgage.
The 15-year fixed-rate offers a higher payment across half the time with a lower interest rate and significant savings in the total home price. Adjustable Rate Mortgages (ARMs) generally offer a lower interest rate and payment initially, but they can work for or against the homeowner, as interest rates can rise or fall during the life of the loan.
Mortgage interest rates also can be lower with a larger down payment. It might behoove buyers to save madly for a few extra years before taking the plunge into homeownership. Many homeowners pay off their mortgages early by making extra payments on the principal only. There may be a prepayment penalty. Refinancing to a shorter-term loan at some point can save money in the long run.
There are many moving parts in the mortgage scene, and if rates go down in 2024, then home buying might go up and the supply of available homes in Austin shrinks, pushing home prices higher. If mortgage rates go higher, some buyers will hold back, houses will not sell as fast, and home prices could drop. Mortgage interest rates also may edge downward if fewer people are buying homes. Banks are in the business of loaning money, after all, and they hurt when home buying hits a slump.
How Inflation Plays a Role in Mortgage Rates in 2024
The general consensus of experts is that mortgage rates will drop some as inflation seems to be leveling out or dropping itself. The historic lows of 2020 and 2021 are not likely to reappear, but with a savvy approach to home buying, an understanding of different mortgages and a seasoned Habitat Hunter real estate professional at your side, you can buy property this year. You can get into a new house, a previously-owned single-family home, a sweet condo or townhouse, a farm or ranch or step into an investment property in and around Austin in 2024.
It may not matter in a big way if interest rates go up or down, as long as it’s not a huge swing, and that is not anticipated. Figure out a price range you can afford with a mortgage rate you can tolerate and enjoy the interest deduction on your taxes. The economic picture for Austin’s continued growth and stability looks great, and a new home nest to furnish, color, outfit and make all your very own may be your reality this year.
