Mortgage rates update: May 29 rates should stay high

Fixed mortgage rates are down for the third week, but may not drop much lower in 2024. Consider buying now.

The news on fixed mortgage rates is a mix of good and bad. On the positive side, rates have decreased for the third consecutive week. However, the bad news is that these rates may not drop much lower for the remainder of 2024.

According to predictions from Fannie Mae and the Mortgage Bankers Association, the average 30-year rate is expected to be around 7% by the end of the year, with a potential drop to 6.5% by the fourth quarter of 2024. With the current rate sitting at 6.94%, there isn't much hope for a significant decrease in rates in the near future.

If you are financially prepared to purchase a home, it may be wise to start looking now rather than waiting for rates to fall further. It's unlikely that rates will see a drastic decline until closer to the end of 2025.

The national average 15-year fixed mortgage interest rate has also seen a slight decrease this week, now at 6.24%, down four basis points from the previous week. Both the 30-year and 15-year rates are slightly lower than their respective four-week averages.

Although the current 30-year rates are just below 7%, making it seem like a less than ideal time to buy a house, it may actually be better than anticipated. While rates have been hovering around 7% for over a month, it's important to remember that in 2021, rates were well below 3%.

Comparatively, the highest mortgage interest rate on record was a staggering 18.63% in October 1981. Suddenly, the current rate of 6.94% doesn't seem as daunting. It's improbable that rates will drop below 3% again unless there is another unforeseen event like the COVID-19 pandemic.

Despite high house prices, the rate of increase has slowed compared to previous years, and new-home construction is on the rise. While it may not be the perfect time to buy a house, it's likely better than many perceive it to be. Additionally, locking in a rate now and refinancing into a lower rate in the future is always an option.

For current homeowners in need of extra funds, 2024 could be a favorable time to consider a home equity line of credit (HELOC). With home values increasing, there may be substantial equity to tap into. Unlike a traditional home equity loan, a HELOC provides a line of credit that can be accessed as needed, with interest only accruing on the borrowed amount.

HELOCs typically offer lower initial interest rates than home equity loans, although they are adjustable and may increase over time. However, in a declining rate environment, there is potential for the rate to decrease. Before pursuing a HELOC, it's essential to conduct thorough research, weigh the advantages and disadvantages, and consult with a lender to determine the best course of action. Utilizing funds for home improvements that enhance the property's value may be a wise investment, but using the credit line for non-essential expenses carries inherent risks.