Home buyers better hurry: This month may offer the best time of year to get a mortgage. But February can offer some of the best rates too, according to a new study from Haus, a home-finance startup.
The firm studied seasonality, loan size, credit scores, and other factors that play a role in mortgage rates. Researchers found that in January, lenders tend to offer discounts of nearly 20 basis points compared to the time period between June and October when rates are typically at their highest. After January, December and February tend to be the next cheapest months, according to the Haus study.
“While we can’t say for exact certainty why rates are lower in January than in the summer months, we can speculate that competition for customers matters,” Ralph McLaughlin, chief economist at Haus, notes in the report. “Since home buying and refinancing is seasonal, there is less mortgage origination in winter months, so it could be that lenders must lower their rates to stay competitive and attract business.”
But the housing market is booming this season. The Haus study analyzed loan data from Freddie Mac for more than 8.5 million mortgages that originated between 2018 and 2021.
Over recent weeks, mortgage rates have been hovering at all-time lows. But economists do warn that rates could rise over the coming months depending on the trajectory of the economy.
Many buyers don’t have much control over the timing of their loans. To put themselves in the best position, the study notes the importance of credit scores. Borrowers with credit scores above 800 tend to receive mortgages with rates that were 42 basis points lower than borrowers with scores below 650. Also, shopping around for a mortgage tends to result in savings. The study found a difference of 75 basis points between the most and least expensive large mortgage lenders nationwide.
“This means that, all else equal, the same borrower would get a 5% rate with the most expensive lender and a 4.25% rate with the least expensive lender,” McLaughlin notes.