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With a new unemployment report scheduled for release this week, a new inflation reading slated to be released next week and a Federal Reserve meeting on the calendar for June 16 — the first such meeting since April — there are plenty of items that can drive mortgage interest rates in new directions this month. And with mortgage interest rates up by around half a percentage point, on average, from where they sat in mid-April, that may not be a good thing for borrowers.
That said, today’s mortgage rates are still marginally improved from where they were in recent years, and locking one in now, before the June Fed meeting even begins, could be the right move to make for many potential homebuyers. To improve their chances of success, however, borrowers who are looking to buy a home or refinance their existing mortgage loan should know both what moves to make and which costly mistakes to avoid.
Right now, there are multiple, timely mortgage interest rate mistakes that these borrowers should take careful steps to avoid. Below, we’ll examine three specific ones to circumvent this month.
Start by seeing which mortgage interest rate offers you’re eligible for here.
3 mortgage interest rate mistakes to avoid this June
To boost your chances of mortgage borrowing success this month, be sure to understand (and avoid making) the following three timely mistakes:
Assume a Fed rate pause won’t cause mortgage rates to rise anyway
There’s virtually no chance that the Federal Reserve will cut or raise interest rates when it meets again later this month, according to current predictions. But borrowers shouldn’t automatically assume that a Fed rate pause won’t cause mortgage interest rates to rise anyway.
Post-meeting comments by Fed officials and new chairman Kevin Warsh hold the potential for mortgage rates to rise. Lenders use the Fed as a guide for the rates they offer borrowers, but they’re not dictated by the central bank. If they interpret the Fed’s pause as meaning higher rates for longer, they may raise their rates regardless, even if the Federal funds rate technically remains frozen.
Consider the benefits of a mortgage interest rate lock before rates change again now.
Assume the usual drivers will cause rates to rise or fall
As noted above, movements in the employment sector, inflation and the Fed can all cause mortgage rates to rise or fall. But it would be a mistake this month to assume that the usual drivers are only at play. As can be seen in recent months, even with a stalled Fed policy, mortgage rates rose anyway.
Geopolitical tensions, overseas conflicts and a rising oil price all contributed to a rise in mortgage rates. If those change this June, then mortgage rates may respond, too. In other words, there are multiple factors to monitor this month that could impact rates, so it’s critical to take a broader view of the climate for small (and temporary) opportunities to lock in a below-average rate.
Dismiss the advantages of a good credit score
Low mortgage interest rates were ubiquitous at the start of the decade, but in recent years, the turmoil in this space has been pronounced and below-average mortgage rates have only temporarily been available. It’s important for borrowers not to dismiss the advantages of a good credit score in this atmosphere, then. You’ll want to be prepared to take advantage when a low rate does present itself, and you won’t be able to with a mediocre credit score.
Don’t make the mistake, then, of assuming that when a good mortgage rate is available, you’ll automatically be eligible for it and instead start working on your credit score right away. By reviewing your credit report for errors or inaccuracies, repairing it and paying down debt now, you’ll both boost your score and better position yourself to secure an improved rate when and if it becomes available again.
The bottom line
The above list of mortgage rate mistakes is not exhaustive but, by avoiding these three specific ones, borrowers can improve their chances of success this month and in the months ahead. Being strategic in today’s mortgage rate environment is more important than usual, and by understanding these three easy-to-make mistakes, borrowers can save money, boost their credit score and, ideally, find a mortgage rate that allows them to buy a home or refinance their current one.
