Key Takeaways
Thirty-year mortgage rates have been falling for the past two weeks, averaging in the mid-to-high 6% range. Today's average is just a third of a percentage point above last year's low of 6.36% trough in early February. Rates are now significantly lower than their October peak of 8.01%, which was the highest 30-year average in more than two decades.
Mortgage rates are affected by inflation, so given the current low inflation rate, it's possible that mortgage rates could fall further — but there's no guarantee — so if you've been waiting to lock in a sub-7% rate on a 30-year loan, now might be a good time.
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Compare today's mortgage rates
Mortgage rates have been on a welcome downward trend this summer, creating new opportunities for some homebuyers to lock in a noteworthy 30-year fixed rate below 7%. That may not seem like a big deal to those who remember the days when mortgage rates were below 5% or even 3%, but with the reality of today's mortgage rates, a fixed rate below 7% is worth considering.
The current average 30-year fixed rate is 6.70%. This is for loans with at least a 20% down payment and an applicant's credit score between 680 and 739. If you make a different down payment amount or are in a different credit score tier, the interest rate quote you receive may be higher or lower.
So how good is 6.70%? Is it low enough that you should consider taking the plunge and applying for a rate lock? The best way to answer this question is to see how today's average compares to recent averages.
Mortgage rates have been on a rollercoaster ride up and down for the past three years, starting strong and then dropping 30-year fixed rates to the high 2% range in the second half of 2021, marking a golden age in mortgage history for homebuyers.
But then, 2022 and 2023 turned out to be disastrous years for mortgage buyers. First, 2022 saw 30-year mortgage rates rise at a ferocious clip from their all-time lows in 2021. Then, in 2023, the 30-year average rose to 8.01%, indicating that rates still have room to rise. Over those two years, the 30-year average rate has risen an astounding 5 percentage points.
These high interest rates have kept many potential homebuyers on the sidelines, waiting for more affordable rates. Luckily, 2024 finally offers some relief. While interest rates are still significantly higher than 2021 and 2022, recent declines have made them more attractive than most of 2023.
Specifically, today's 6.70% average is the lowest since March 29th. Since then, the 30-year average has risen to 7.37%, meaning that interest rates are now two-thirds of a percentage point lower than they were in April. That's significant.
To be sure, current rates aren't the cheapest they've been in the last 12 months — in late January and early February, the 30-year average rate dipped below 6.50% for four days, dropping to as low as 6.37% — but average rates since then have been significantly higher than what you can lock in right now.
How inflation affects mortgage rates
The mortgage market is influenced by a complex combination of many economic factors, including inflation, consumer demand, housing supply, the current strength of the economy, and bond market conditions, particularly the yield on the 10-year Treasury note.
While it's widely believed that Federal Reserve interest rate changes influence mortgage rates, in reality, inflation is a much larger determinant of the rates mortgage lenders offer. Lower inflation rates are often good news for home buyers and other consumer borrowers, and that's exactly what we've seen recently. Thanks to the Federal Reserve's 2022-2023 interest rate hike campaign, inflation has fallen from a 40-year high of 9.1% in June 2022 to the 3.0% range over the past year.
More recently, the June Consumer Price Index, released on July 11, provided encouraging evidence that inflation is trending downwards. After 3.3% in May, the June CPI rate was just 3.0%.
The Fed's goal is to further reduce inflation to its 2% target level. If inflation continues to fall, mortgage rates could fall further. However, as we have seen over the past year, it is proving difficult for the Fed to reduce inflation below the 3% threshold. While the central bank expects inflation to continue to fall, it is uncertain whether and when that target will be met.
Should I lock in interest rates at 7% or below, or should I wait? It's a tough call.
If you've been waiting to buy a home because you can't afford interest rates in the mid-to-high 7% or even 8% range, now may be your chance to secure an interest rate lock in the 6% range. A rate lock typically guarantees your interest rate for 30 to 60 days, allowing you to complete your home purchase with a locked-in interest rate, even if interest rates rise in the future.
This may be the right choice if you can’t or don’t want to wait too long to buy a home, or if you just want the peace of mind of securing an interest rate below 7 percent with the hopes of being able to refinance to a lower rate in the future.
On the other hand, if you wait a little longer to buy, you could benefit from an even lower interest rate. It's impossible to predict what the upcoming inflation report will show (July's figures are due out on August 14th). Still, if inflation starts to drop below 3%, mortgage lenders are likely to cut rates further.
How to Track Mortgage Interest Rates
The national and state averages shown above are provided as is through the Zillow Mortgage API, assuming an LTV (loan-to-value ratio) of 80% (i.e. at least a 20% down payment) and an applicant's credit score in the 680-739 range. The resulting interest rate represents the rate a customer can expect when receiving an actual quote from a lender based on their qualifications, and may differ from the advertised teaser rate. © Zillow, Inc., 2024. Use subject to Zillow Terms of Use.