The average interest rate for a standard 30-year fixed mortgage is 7.05% today, a decrease of -0.12% since one week ago. The average rate for a 15-year fixed mortgage is 6.57%, which is a decrease of -0.10% from the same time last week. The Federal Reserve has been delaying rate cuts due to stagnant inflation data, but mortgage rates could still decrease later in the year as housing market predictions fluctuate in response to economic data and geopolitical events.
Mortgage rates are expected to gradually decline in 2024, providing an opportunity for borrowers to secure lower rates by comparing offers from multiple lenders. The most common mortgage terms are 15 and 30 years, with options for 10-, 20- and 40-year mortgages. Fixed-rate mortgages offer stability with a set interest rate for the loan duration, while adjustable-rate mortgages feature a fixed rate for a limited time before adjusting annually based on the market. Buyers can choose between lower rates upfront with an adjustable-rate mortgage or stability and predictability with a fixed-rate mortgage.
For a 30-year fixed-rate mortgage, the average rate is 7.05% today, making it the most common loan term. While a 30-year mortgage typically has a higher interest rate than a 15-year mortgage, it offers a lower monthly payment. A 15-year fixed-rate mortgage, with an average rate of 6.57%, comes with a higher monthly payment but allows borrowers to pay less interest over the long term and pay off the mortgage sooner. A 5/1 adjustable-rate mortgage, with an average rate of 6.73%, provides a lower introductory interest rate for the first five years before potentially adjusting higher.
High inflation and aggressive interest rate hikes by the Federal Reserve in recent years have led to increased mortgage rates from record lows. The Fed’s federal funds rate, currently between 5.25% to 5.5%, indirectly affects borrowing costs for home loans. Mortgage rates have been fluctuating between 6.5% and 7.5% since late last fall, impacting homebuyers’ budgets and affordability. Limited housing inventory, slow wage growth, and elevated home prices further contribute to the affordability crisis and reduced mortgage demand.
Most experts predict mortgage rates will end 2024 between 6% and 6.5%, depending on the Fed’s decision to cut interest rates. The housing market will continue to monitor factors such as inflation, monetary policy, jobs data, and market expectations to determine the direction of mortgage rates. While rates are expected to fall to around 6.5% by the year-end, there remains a level of volatility influenced by economic indicators and geopolitical events. Potential factors like ongoing inflation deceleration, economic slowdown, or geopolitical uncertainty could lead to lower mortgage rates, while inflation risks may push rates higher.
It is essential to factor in your financial situation and long-term goals when considering a mortgage. Creating a budget, staying within your means, saving for a down payment, improving your credit score, paying off debt, and researching loan options and lenders are crucial steps to securing a competitive mortgage rate. Despite high rates and home prices, the housing market will not remain unaffordable indefinitely, making it vital to prepare yourself financially for when the time is right to purchase a home.
