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Mortgage rates are way down, and they could drop more in 2024.
Average 30-year mortgage rates are now the lowest they've been in over four months. Rates have trended down across the board in response to economic data showing that inflation is likely to continue cooling in the coming months.
But whether mortgage rates will continue to fall depends a lot on the Federal Reserve. Right now, markets are expecting that the Fed will choose to keep the federal funds rate steady at its meeting this week. It's possible we'll even see the central bank cut rates once or twice in the first half of 2024, according to the CME FedWatch Tool.
Lowering the federal funds rate would remove some of the upward pressure off of mortgage rates and allow them to fall. But if inflation doesn't come down sufficiently, the Fed could hike rates once more. This would likely push mortgage rates up.
Mortgage Rates Today
Mortgage Refinance Rates Today
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Use our free mortgage calculator to see how today's mortgage rates will affect your monthly and long-term payments.
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 7.03% last week, according to Freddie Mac. This is a 19-basis-point decrease from 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 6.29% last week, according to Freddie Mac data, which is a 27-basis-point drop 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 Up?
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 3.2%. As inflation comes down, mortgage rates should, too. But we'll likely need to see price growth slow further before we see substantial drops in rates.
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 considers cutting rates, which could happen next year, mortgage rates should fall even further.