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Mortgage rates have finally dropped a bit. After increasing for four consecutive weeks, average 30-year mortgage rates fell six basis points to 6.88% this week, according to Freddie Mac.
Average 15-year mortgage rates also fell to 6.22%.
Mortgage rates are expected to go down in 2024, but they increased in February in response to hotter-than-expected economic data. More recent labor market and inflation data has been in line with expectations, allowing rates to ease somewhat this month.
“Evidence that purchase demand remains sensitive to interest rate changes was on display this week, as applications rose for the first time in six weeks in response to lower rates,” Sam Khater, Freddie Mac’s chief economist, said in a press release. “Mortgage rates continue to be one of the biggest hurdles for potential homebuyers looking to enter the market. It’s important to remember that rates can vary widely between mortgage lenders so shopping around is essential.”
If you’re hoping to buy a home soon but are waiting for rates to drop, you may have better luck in the second half of 2024. The Federal Reserve is expected to cut rates at some point this year, but it likely won’t do so for at least a few more months.
Once the Fed starts lowering rates, mortgage rates should trend down, too. In its latest forecast, Fannie Mae predicted that 30-year mortgage rates will reach 5.9% by the end of the year.
Mortgage Rates Today
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Mortgage Refinance Rates Today
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Mortgage Calculator
Use our free mortgage calculator to see how today’s mortgage rates will affect your monthly and long-term payments.
Mortgage Calculator
$1,161
Your estimated monthly payment
- Paying a 25% higher down payment would save you $8,916.08 on interest charges
- Lowering the interest rate by 1% would save you $51,562.03
- Paying an additional $500 each month would reduce the loan length by 146 months
By plugging in different term lengths and interest rates, you’ll see how your monthly payment could change.
30-Year Fixed Mortgage Rates
The average 30-year fixed mortgage rate was 6.88% this week, according to Freddie Mac. This is six basis points lower than it was the week before.
The 30-year fixed-rate mortgage is the most common type of home loan. With this type of mortgage, you’ll pay back what you borrowed over 30 years, and your interest rate won’t change for the life of the loan.
The lengthy 30-year term allows you to spread out your payments over a long period of time, meaning you can keep your monthly payments lower and more manageable. The trade-off is that you’ll have a higher rate than you would with shorter terms or adjustable rates.
15-Year Fixed Mortgage Rates
Average 15-year mortgage rates were 6.22% this week, according to Freddie Mac data, which is a four-basis-point decrease from the previous week.
If you want the predictability that comes with a fixed rate but are looking to spend less on interest over the life of your loan, a 15-year fixed-rate mortgage might be a good fit for you. Because these terms are shorter and have lower rates than 30-year fixed-rate mortgages, you could potentially save tens of thousands of dollars in interest. However, you’ll have a higher monthly payment than you would with a longer term.
Are Mortgage Rates Going Down?
Mortgage rates increased throughout most of 2023. But mortgage rates are expected to trend down in the coming months and years.
In the last 12 months, the Consumer Price Index rose by 3.1%. As inflation comes down and the Federal Reserve is able to start cutting the federal funds rate, mortgage rates should fall further as well.
For homeowners looking to leverage their home’s value to cover a big purchase — such as a home renovation — a home equity line of credit (HELOC) may be a good option while we wait for mortgage rates to ease. Check out some of our best HELOC lenders to start your search for the right loan for you.
A HELOC is a line of credit that lets you borrow against the equity in your home. It works similarly to a credit card in that you borrow what you need rather than getting the full amount you’re borrowing in a lump sum. It also lets you tap into the money you have in your home without replacing your entire mortgage, like you’d do with a cash-out refinance.
Current HELOC rates are relatively low compared to other loan options, including credit cards and personal loans.
How Do Fed Rate Hikes Affect Mortgages?
The Fed aggressively raised the federal funds rate in 2022 and 2023 to slow economic growth and get inflation under control. As a result, mortgage rates spiked.
Mortgage rates aren’t directly impacted by changes to the federal funds rate, but they often trend up or down ahead of Fed policy moves. This is because mortgage rates change based on investor demand for mortgage-backed securities, and this demand is often impacted by how investors expect Fed hikes to affect the broader economy.
Now that the Fed has paused hiking rates, mortgage rates have come down a bit. Once the Fed starts cutting rates, which is likely to happen this year, mortgage rates should fall even further.