Lately, mortgage rates have been pretty flat.
They enjoyed a nice string of six or seven weeks where they tumbled down from around 7.25% to 6.75% before losing steam.
While it’s unclear what caused them to plateau, I’ve pointed to things like tariff talk and general uncertainty.
It seems like we’re kind of stuck at 6.75%, which isn’t horrible, but also not what some had hoped when Trump and Bessent spoke about lowering interest rates.
But there’s one thing working in favor of mortgage rates right now, and that’s year-ago levels.
Like Everything Else, Context Matters to Mortgage Rates
Context matters and when mortgage rate surveys are released, they typically include a year-ago level.
This provides a more complete picture of where they stand today. And can affect things like home buyer sentiment if they are priced lower or higher than prior periods.
In a sense, today’s mortgage rate doesn’t exist in a vacuum. It’s compared to yesterday, last week, and last year.
To illustrate this, one simply has to consider that the long-term average for the 30-year fixed is around 7.75%.
Meanwhile, the going rate for a 30-year fixed today is about one full percentage point lower. Hooray! Right?
Well, not exactly. Why? Because the 30-year fixed was sub-3% in early 2022, and in the 2-4% range for the prior decade before rates nearly tripled a couple years ago.
So while mortgage rates today are below their long-term average, and not even close to those scary 1980s mortgage rates, it doesn’t provide much comfort.
At the end of the day, the rate is still a lot higher than it used to be, and that’s all people think about.
They don’t care what normal mortgage rates are. They care that they’re way higher than what their friend or family member has.
They care that the interest rate is cost-prohibitive, making it super difficult to afford a home purchase today.
Mortgage Rates Can Do Nothing and Look Better, But How?
Now the semi-good news. If you look at mortgage rates today versus last year, they’re lower.
Not a lot lower, but they are indeed lower. Per MND’s daily rate survey, the 30-year fixed averaged 6.78% today.
This isn’t a whole lot different than the 6.79% it averaged a week ago. It’s pretty much unchanged.
However, rates are 33 basis points (bps) below year-ago levels. So in mid-March 2024, the 30-year fixed was closer to 7.125%.
But here’s where it gets interesting. The 30-year fixed was 6.87% on March 11th, 2024, meaning the difference between that and the 6.79% rate seen last week was only 8 bps.
In other words, the gap between today’s rates and year-ago rates has widened. And not because mortgage rates have fallen recently.
It’s because at this time last year, mortgage rates were rising. So if they just stay flat, that gap will grow wider as the days go by.
The 30-year fixed climbed to around 7.50% by mid-April last year, meaning if the 30-year fixed simply stays put at 6.75%, rates will eventually be 75 bps lower than year-ago levels.
If rates happen to fall to say 6.50% over the next month, rates would be a full percentage point lower!
So not much needs to happen for those year-over-year numbers to start looking a lot brighter.
Lower YoY Mortgage Rates Will Boost Home Buyer Sentiment (and Refinances)
The spring home buying season is currently getting underway, with the months of April through June typically the peak buying season, per the National Association of Realtors.
As noted, if mortgage rates simply do nothing and are still roughly 6.75% next month, they’ll be about 75 bps below their year-ago levels of 7.50%
If they come down a smidge more and get to 6.50% next month, they’ll be 1% lower YoY.
And you can bank on real estate agents, loan officers, and mortgage brokers pointing this fact out to prospective home buyers and existing homeowners.
For the buyers, it’ll be sold as lower rates, increased inventory, and perhaps more sellers willing to budge on price.
The combination could be enough to turn things around and make the 2025 spring home buying season a lot better than last year.
The problem with last year was rates began the year at around 6.70% and climbed to 7.50% during the peak selling season.
It was a buzzkill and the housing market suffered as a result. Existing home sales were terrible last year, registering just over four million sales, the lowest total since 1995.
And it may have all come down to timing. Mortgage rates fell to around 6% by September, but the peak buying/selling season had already passed.
So if the timing is right this year, and rates simply maintain, it could be a boon for home sales and they could best 2024 numbers.
At the same time, you’ve got existing homeowners who could be ripe for a rate and term refinance for the same reason.
If they got a mortgage last spring when rates were closer to 7.50%, but missed the small window to refinance before rates increased again, they too could be in the money to save some bucks.
Before creating this site, I worked as an account executive for a wholesale mortgage lender in Los Angeles. My hands-on experience in the early 2000s inspired me to begin writing about mortgages 19 years ago to help prospective (and existing) home buyers better navigate the home loan process. Follow me on X for hot takes.