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For those thinking about buying a home, understanding what's happening with mortgage rates is essential. Right now, they’re stuck in neutral, hovering just above 7%. It’s like being in rush hour traffic, waiting for the light to turn green. But don’t worry—relief is on the horizon.
The Personal Consumption Expenditures (PCE)—the Fed’s favorite measure of inflation—came in as expected. While the headline number ticked up from 2.4% to 2.6%, the more important core PCE, which strips out food and energy, held steady at 2.8%. The Fed’s goal is 2%, and here’s the good news:
Key months that previously made inflation look worse than it really was have now passed. One of the biggest inflation drivers, shelter costs (basically rent), is finally cooling down. The actual increase in rents is far lower than what’s currently being reported in the inflation data. Think of it like a long, brutal summer finally giving way to crisp fall weather—and lower mortgage rates ahead.
Lower inflation means better news for homebuyers. Inflation is calculated using the last 12 months of data, meaning every month, an old number drops off and a new one takes its place. The December report replaced a super-low inflation number from last year, making things look a little shaky—kind of like squeezing a big pig through a small snake. Not a pretty sight, but that phase is over.
Now, some much higher inflation figures from last year are about to be replaced in January, February, and March. If inflation continues to cool, mortgage rates should follow. The three-month core inflation rate is trending at 2.1%, and the six-month rate is 2.3%. That means inflation is on track to hit the Fed’s 2% target, which could push mortgage rates into the mid-6% range by May.
So, should homebuyers wait? Nope. The market is waking up. Whether it’s New Year's resolutions, a new Trump administration—whatever the reason, buyers are jumping back in and realizing that waiting for a big rate drop isn’t a winning strategy. Many are getting pre-approved now, actively house hunting, and preparing to strike. They're taking time to find the right home, but they don’t want to wait too long and risk missing out.
Spring buying season is approaching fast. Purchase applications are already rising. Many buyers are watching homes slip through their fingers online and thinking, "Oh no, I liked that house!" They don’t want to miss out again. Some are even moving up their timelines, anticipating an influx of out-of-state buyers, especially from California, due to the recent fires.
For those who are pre-approved, waiting could mean facing more competition and losing negotiation leverage. Right now, buyers have the advantage. The best time to buy is before the spring rush—especially if rates drop.
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The information contained is the viewpoint of the presenter(s). Individuals should consult their own financial representative.
Estimated Mortgage Payment is for exemplary purposes only. Contact a licensed loan officer for exact numbers and APR. Additional rates and terms may apply and are subject to change without notice. Loan scenario assumes a purchase price of Zillow's list price and a 10% down payment. Points and fees not included. Property tax, homeowners insurance, mortgage insurance, and HOA fees are approximate and may vary. Other fees may apply. Product displayed is a conventional 30-year fixed rate mortgage using the current average rate as shown on Mortgage News Daily (mortgagenewsdaily.com).
Estimated Qualifying Income assumes a homebuyer has a FICO score above 740, no other credit debt, and a debt-to-income (DTI) ratio of 43%.
For exact numbers and APR or to run a loan scenario based on your own credit and income, contact our office at (858) 259-8700.
Rate Source: Mortgage News Daily. Rates displayed are approximate, subject to change, and do not necessarily reflect rates available to you. MND’s methods involve an objective component based on lenders' raw prices as well as a subjective impression from their network of originators. For more information about how these rates are calculated, visit www.mortgagenewsdaily.com/mortgage-rates/about.
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