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Mortgage rates have been trending lower this month and could continue to fall through the remainder of 2024. Thirty-year mortgage rates averaged about 6.31% this week, down 19 basis points from the previous week, according to Zillow data.
The rate easing came in response to data showing the economy continues to cool after a booming past few years.The Consumer Price Index, a key measure of inflation, peaked at 9.1% in June 2022 and fell to 3.0% last month.
As long as inflation continues to slow, mortgage rates should continue to trend lower. According to the CME FedWatch tool, the Federal Reserve is expected to begin cutting the federal funds rate at its September meeting, which should ease some of the upward pressure on mortgage rates and send them lower.
But if inflation stalls, the Fed may decide to wait a little longer before starting to cut rates, which would likely prevent mortgage rates from falling further.
Today's mortgage rates
Mortgage Type Today's Average Interest Rates
This information is provided by Zillow. See more mortgage rates on Zillow Zillow Real Estate
Today's mortgage refinance rates
Mortgage Type Today's Average Interest Rates
This information is provided by Zillow. See more mortgage rates on Zillow Zillow Real Estate
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Use our free mortgage calculator to see how current interest rates will affect your monthly payment.
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$1,161 Estimated Monthly Payment
Paying a 25% higher down payment would save you $8,916.08 in interest. Lowering your interest rate by 1% would save you $51,562.03. Paying an extra $500 per month would shorten the term of your loan by 146 months.
Clicking on “Details” will also show you how much you'll pay over the life of your mortgage, including the principal and interest ratios.
30-year fixed mortgage rate
The average interest rate on a 30-year fixed mortgage was 6.77% last week, down 12 basis points from the previous week, according to Freddie Mac.
A 30-year fixed rate mortgage is the most common type of mortgage. With this type of mortgage, you pay back the amount you borrow over 30 years, and your interest rate will remain the same for the life of the loan.
A long 30-year repayment term spreads your payments over a longer period of time, making your monthly payments lower and more manageable. The trade-off is that your interest rate will be higher than if you had a shorter repayment term or a variable rate loan.
15-year fixed mortgage rate
The average interest rate on a 15-year mortgage fell to 6.05% last week, a 12 basis point drop from the previous week, according to data from Freddie Mac.
If you want the predictability that a fixed rate offers, but want to lower your interest payments over the life of your loan, a 15-year fixed-rate mortgage may be right for you. These terms are shorter and have lower interest rates than 30-year fixed-rate mortgages, which could save you tens of thousands of dollars in interest. However, your monthly payments will be higher than you would with a longer term.
How will the Federal Reserve's interest rate hike affect mortgages?
The Federal Reserve has significantly increased the federal funds rate in an effort to slow economic growth and tame inflation. So far, inflation has slowed significantly but is still just above the Fed's target rate of 2%.
While mortgage interest rates are not directly affected by changes in the federal funds rate, they often tend to rise or fall ahead of Fed policy shifts. This is because mortgage interest rates change based on investor demand for mortgage-backed securities, and this demand is often influenced by how investors expect Fed rate hikes to affect the overall economy.
The Federal Reserve has signaled that it will likely stop hiking interest rates and may start cutting them later this year, which could lead to mortgage rates trending lower later this year.
When will mortgage rates fall?
Mortgage rates have risen dramatically over the past two years but are expected to fall this year.
The Consumer Price Index increased 3.0% year-over-year in June 2024. Inflation has slowed significantly since peaking last year, and mortgage rates should start to trend lower soon.
For homeowners looking to use the value of their home to cover a major purchase, like a home improvement, a home equity line of credit (HELOC) may be a good option while they wait for mortgage rates to drop. Check out our best HELOC lenders to find the best loan for you.
A HELOC is a line of credit that allows you to borrow against the equity in your home. It's similar to a credit card in that you only borrow what you need, rather than a lump sum. It also allows you to tap into the money you have left in your home without having to pay off your entire mortgage like a cash-out refinance would.
Current HELOC interest rates are relatively low compared to other loan options such as credit cards and personal loans.
Molly Grace
Mortgage Reporter