Mortgage rates broke the 7% barrier this week, according to Bankrate's latest survey of lenders. This is the first time the 30-year average has dipped below 7% since February, driven by optimism that the Federal Reserve may cut rates in the near future.
The 30-year mortgage rate fell to 6.92%. The 15-year rate fell to 6.92% and the 30-year jumbo rate fell to 6.92%.
In this week's survey, discount points and origination points for a 30-year fixed mortgage averaged a total of 0.28. Discount points are a way to lower your mortgage interest rate, while origination points are a fee charged by lenders for originating, underwriting and processing your loan.
Monthly mortgage payment at current interest rate
According to the U.S. Department of Housing and Urban Development, the national median household income in 2024 will be $97,800, and the median price of an existing home sold in May 2024 was a record $419,300, according to the National Association of Realtors. Assuming a 20% down payment and a mortgage interest rate of 6.92%, a monthly payment of $2,214 would represent 27% of a typical household's monthly income.
Will mortgage rates fall?
In the simplest sense, the economy determines whether mortgage rates go up or down. 30-year mortgage rates tend to fall during recessions, but they don't always do so. And today's economy is far from being in a recession: The job market is strong, and inflation, while lower than it was a few months ago, is still above the Federal Reserve's 2% target.
The Fed is likely to cut interest rates, even if only once, this year, and optimism about rate cuts has pushed mortgage rates below 7 percent, said Michael Merritt, senior vice president at BOK Financial, a bank based in Tulsa, Oklahoma.
“It's not where consumers want it or where mortgage companies want it, but it does provide some peace of mind,” Merritt said.
To be clear, mortgage rates are not set directly by the Fed but are determined by investor interest, particularly in the 10-year Treasury note, which is a leading indicator of fixed mortgage prices. Rates can be volatile, spiking on news of Fed rate hikes and then plummeting in anticipation of rate cuts. Because the Fed is not expecting as many rate cuts this year as initially expected, mortgage rates are more likely to decline rather than plummet.
methodology
Bankrate.com's national survey of leading lenders is conducted weekly. To conduct its national average survey, Bankrate obtains interest rate information from the 10 largest banks and thrifts in the 10 largest markets in the United States. For Bankrate.com's national survey, our market analysis team collects interest rates and/or yields on bank deposits, loans, and mortgages. We have conducted this survey the same way for over 30 years, and it is conducted consistently, allowing for accurate apples-to-apples comparisons across the country. Our rates differ from other national surveys, especially the rates published weekly by Freddie Mac. Each week, Freddie Mac surveys lenders for interest rates and points based on first-lien prime conventional conforming home purchase mortgages with 80% LTV. According to Freddie Mac, “The lenders surveyed each week represent a mix of lender types, including thrifts, credit unions, commercial banks, and mortgage lenders, roughly proportional to the level of mortgage business each type controls nationwide.”