Mortgage Rates and Your Note Rate

On Tuesday January 21, Bankrate.com reported the following on mortgage rates:

30 Year Fixed Rate Mortgage 7.11%

15 Year Fixed Rate Mortgage 6.41%

Last week the rates were 7.10% and 6.39% respectively.

Greg McBride, Chief Financial Analyst, says:"The average 30 year fixed mortgage rate will spend most of the year 2025 in the 6s, with a short-lived spike above 7 per cent, but never getting below 6 per cent."

He claims 3 main factors are affecting mortgage rates - inflation, a changing White House, and geopolitical developments.

The rise in rates above 7% is happening for the first time since mid 2024, not a good sign for a housing market that has had two consecutive years of poor sales. Says Selma Hepp, Chief Economist at CoreLogic; "Only 6 months ago, many predicted that interest rates would be reduced slowly through 2025 and mortgage rates would reach the mid-to-high 5% range. That outlook has changed tremendously."

In a September survey done by John Burns Research & Consulting, 70% of 1000 homeowners and renters said the highest mortgage rate they would accept was 5.49% - or lower.

Yikes!

Given this data, if you will be creating a note this year, what will your terms look like? What interest rate will be acceptable to you?

Note industry veterans will typically say that the note interest rate should be above current mortgage rates, perhaps as much as 2% to account for the risk and changing rates over the lifetime of the note.

So, be aware of current economic conditions, mortgage rates and political happenings and construct your note terms accordingly,

Feel free to contact me directly at [email protected] with your questions or pricing options for your note.