Despite all the mortgage drama from Federal Reserve policy to debates over what inflation benchmark is best, home loan pricing was actually fairly normal in 2024.
To successfully see what’s next for mortgages, please try to ignore the often breathless coverage of the weekly reports – and, more recently, daily updates – tracking the ups and downs of loan pricing.
This information overload may be good for folks who sell the analysis, but trying to stay current on mortgages twists can be bad for the psyche. It’s much like eyeballing Wall Street’s daily stock grind, which does no good for your stock portfolio.
To gain some understanding of mortgage swings, my trusty spreadsheet peeked at 52 years worth of Freddie Mac mortgage stats. We tried to find patterns, and some serenity, by primarily using the annual average of the weekly reports tracking the prices of the 30-year fixed loans.
Ponder that for all of 2024, mortgage rates averaged 6.72%. That may sound high to young people or folks with short memories, but it ranks only as the 31st-highest yearly rate out of these 52 years.
Now, old-timers can tell you tales about the worst year for borrowers – the 16.7% rates of 1981.
Conversely, recent memories are clouded by the anomaly of 2021, when annual average rates hit their historic low – 3% in the middle of the pandemic’s economic upheaval.
But please be advised that a normal mortgage rate is 7.7%, historically speaking.
Did mortgage rates rise or fall in 2024?
For all of 2024, the 6.72% average mortgage rate was 0.09 percentage points less than the 6.81% of 2023. That ranks as this metric’s 24th biggest dip.
That seems logical when you factor Federal Reserve moves lowering rates in the second half of the year. Central bankers think rate-moving inflation is largely cured by their calculations.
However, if you peek only at the year’s final weekly rate – 6.85% – and compared it with the end of 2023, you’d say rates rose by 0.24 percentage points. That’s the No. 16 largest increase, by this measurement.
It’s an example of how the Fed’s rate cuts prompted mortgage investors to see troublesome inflation patterns and seek higher rates.
Now, I’d be remiss if we totally ignored 2024’s weekly rates swings.
Its highest rate of 7.22% came the week of May 22. Looking back 52 years, that ranks as only the 30th highest on record. Meanwhile, 2024’s bottom at 6.08% on Sept. 26 ranked No. 32 for lows.
The narrow gap between the year’s extremes is another example of how ho-hum 2024 was for mortgage rates.
The 1.14 percentage-point spread between the peak and trough were the 29th largest of the 52 years tracked. It’s also thinner than the 1.43-point average chasm.
Yes, this gap varies wildly, too, running from 4.17 points in 1980 to 0.35 points in 1977.
But what’s really maddening to any mortgage seeker is what such gyrations do to house payments.
There’s a 12% difference in the size of the check you’d send the lender if you priced a loan at 2024’s highest and lowest rates.
That may seem like a large bite, but it ranks No. 27 over the 52 years and just under the 14% average spread.
Need I remind you, this payment gap was 55% in 2022 when the Fed reversed its pandemic-era cheap money policy?
Or you can go back to 1977, and pine over that year’s mere 3% payment spread.
So, what’s next?
A year ago, I took the average difference between a year’s high and low rate – 1.4 percentage points – and applied it to 2023’s year-end rate of 6.6%. That projected mortgages running between 7.3% and 5.9% in 2024.
Well, this historical formula proved prescient for 2024. The year’s weekly rates fit within those parameters. This means, we have to do the math again, yes?
Thus, I’m forecasting that, based on the 6.85% rate at year-end 2024, mortgages will run between 7.55% and 6.15% in 2025.
Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at jlansner@scng.com
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