The 30-year mortgage rate has increased a little this week, while the 15-year rate has gone down slightly. Neither change from last week is very drastic, though.
“While incoming economic signals indicate lower rates of inflation, we do not expect rates will decrease meaningfully in the near-term,” Sam Khater, chief economist at Freddie Mac, said in a press release. “On the plus side, inventory is improving somewhat, which should help temper home price growth.”
No, mortgage rates might not plummet during the spring and summer home-buying season. But the good news is that while house prices may seem high, prices are not rising as quickly as they were from 2020 through 2022. This could make your home-buying experience less stressful than it would have been a couple of years ago.
On the other hand, the national average 15-year fixed mortgage rate has gone down a bit. The 15-year rate is 6.06%, which is down five basis points since last week.
30-year vs. 15-year fixed mortgage rates
As a rule of thumb, 15-year mortgage rates are lower than 30-year mortgage rates. When comparing 15- versus 30-year mortgage rates, know that the shorter term will save you money on interest in the long run. However, your monthly payments will be higher because you’re paying off the same loan amount in half the time.
For example, with a $400,000 30-year mortgage and a 6.82% rate, you'll make a monthly payment of $2,613.03 toward your principal and interest. As interest accumulates and compounds over decades, you’ll end up paying $540,691 in interest.
If you get a $400,000 15-year mortgage with a 6.06% rate, you’ll pay $3,388.41 monthly toward your principal and interest. However, you’ll only pay $209,913 in interest over the years.
With a fixed-rate mortgage, your rate is locked in from day one. You will get a new rate if you refinance your mortgage, though.
An adjustable-rate mortgage keeps your rate the same for a set period of time. Then the rate will go up or down depending on several factors, such as the economy and the maximum amount your rate can change according to your contract. For example, with a 7/1 ARM, your rate would be locked in for the first seven years, then change every year for the remainder of your term.
Adjustable rates typically start lower than fixed rates, but once the initial rate-lock period ends, you risk your interest rate going up.
Will mortgage rates go down in 2024?
In Fannie Mae’s latest rate forecast, the government-sponsored enterprise said it expects 30-year fixed rates to end 2024 at 6.4%. So while rates will likely go down in 2024, the drop might not be as drastic as people were expecting at the end of last year.
The trajectory of future mortgage rates will largely depend on the Federal Reserve’s decision on whether or not to cut the federal funds rate at its meetings throughout the year. The federal funds rate doesn’t directly impact mortgage rates, but it is a good indicator of how the economy is doing overall. So when the Fed rate drops, mortgage rates typically go down, too.
Will mortgage rates go down in 2024? In Fannie Mae's latest rate forecast, the government-sponsored enterprise said it expects 30-year fixed rates to end 2024 at 6.4%. So while rates will likely go down in 2024, the drop might not be as drastic as people were expecting at the end of last year.
The 30-year fixed mortgage rate is expected to fall to the mid-6% range through the end of 2024, potentially dipping into high-5% territory by the end of 2025. However, recent economic developments have led some forecasters to believe that rates will remain elevated at around 7% for the remainder of this year.
Mortgage rates could fall in 2024, but that's not a given. The Mortgage Bankers Association projects a 6.5% rate by the end of the year, while Fannie Mae predicts 2024 will end with rates at 7%.
Locking in early can help you get what you were budgeting for from the start. As long as you close before your rate lock expires, any increase in rates won't affect you. The ideal time to lock your mortgage rate is when interest rates are at their lowest, but this is hard to predict — even for the experts.
Also, mortgage rates are still much higher than we've been used to in recent years. On 30 May 2024, the average 2 year fixed mortgage rate is 5.80%. While this is a significant drop from its July 2023 peak of 6.86%, it's still much higher than December 2021 when was 2.34%.
The Federal Reserve on Wednesday left its benchmark interest rate unchanged and penciled in only one rate cut in 2024 as policymakers await more evidence that U.S. inflation is cooling in earnest.
Beyond the 35 percent of economists who expect rates to stay high through the end of 2026, 1 in 4 economists (24 percent) see rates holding above 2.5 percent until the end of 2025, while a smaller share (12 percent) see rates sticking at a restrictive level until the end of 2027 or later.
Here's where three experts predict mortgage rates are heading: Around 6% or below by Q1 2025: "Rates hit 8% towards the end of last year, and right now we are seeing rates closer to 6.875%," says Haymore. "By the first quarter of 2025, mortgage rates could potentially fall below the 6% threshold, or maybe even lower."
In today's housing market, homebuyers should have realistic expectations. Experts predict mortgage rates to inch closer to 6% by the end of the year as inflation cools and the Federal Reserve starts to cut interest rates. Record-low mortgage rates aren't in the cards again, and that's likely for the best.
Currently, over six out of 10 purchase and refinance loans are at rates below 4%, according to Freddie Mac. Those ultra-low rates are unlikely to return anytime soon—if at all—resulting in limited motivation for many homeowners to refinance.
The bottom line. Today's elevated mortgage rate environment isn't preferable for homebuyers, but it doesn't mean that you should refrain from acting, either. If you discover your dream home, can afford the interest rate, find an affordable house, or have an alternative to rent, it can be worth it for you now.
When you lock your interest rate, you're protected from rate increases due to market conditions. If rates go down prior to your loan closing and you want to take advantage of a lower rate, you may be able to pay a fee and relock at the lower interest rate. This is called "repricing" your loan.
The MBA's forecast suggests that 30-year mortgage rates will fall into the 6.5% to 6.9% range throughout the rest of 2024, and NAR is predicting a similar trajectory. But Fannie Mae thinks rates could stay in the low 7% range this year.
If you are contemplating fixing your mortgage rate, it's prudent to take action now rather than later. Don't forget, if you secure a fixed-rate deal, which is ready to start when your existing fixed-rate deal ends, it is possible to change the new deal if mortgage rates drop in the meantime.
It's unlikely that CD rates will rise in 2024. The Federal Reserve is expected to either maintain or cut rates this year, which would cause CD rates to remain stable or fall, respectively. What is the highest CD rate now? It's not uncommon to see short-term CD rates above 5.00% APY.
Auto loan rates are expected to stop rising and possibly start descending in 2024, but they'll likely remain elevated in comparison to recent years (alongside the broader interest rates environment).
While the Fed maintained its target rate in the 5.25 percent to 5.50 percent range at its June 2024 meeting, the central bank hasn't yet declared victory in its fight against inflation. However, it seems the Fed is done raising its target rate in this cycle and forecasts one rate reduction later in 2024.
The median projection for the benchmark federal funds rate is 5.1% by the end of 2024, implying just over one quarter-point cut. Through 2025, the FOMC now expects five total cuts, down from six in March, which would leave the federal funds rate at 4.1% by the end of next year.
Introduction: My name is Duane Harber, I am a modern, clever, handsome, fair, agreeable, inexpensive, beautiful person who loves writing and wants to share my knowledge and understanding with you.
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