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- Mortgage rates for September 12, 2024, are around 5.7%, according to Zillow data.
- Rates have dropped substantially in recent weeks, but future decreases may be more moderate.
- Rates are expected to ease this year as inflation slows and the Fed is able to lower the federal funds rate.
Mortgage rates have dropped nearly 20 basis points this week, with 30-year rates now near 5.7%, according to Zillow data. Rates are down ahead of next week's Federal Reserve meeting, where central bankers are expected to lower the federal funds rate.
But borrowers shouldn't expect mortgage rates to drop more when the Fed cuts rates. A quarter-point cut to the Fed's benchmark rate has already been priced in, and recent inflation data has made a larger cut unlikely.
In August, the consumer price index rose 2.5% year over year , the Bureau of Labor Statistics reported on Wednesday. This is down from the previous month's reading of 2.9% and in line with expectations. But core inflation, which excludes the volatile food and energy categories, ticked up slightly on a monthly basis from 0.2% to 0.3%.
The Fed raised rates in 2022 and 2023 to combat record-high inflation. Now that inflation is back down and the labor market appears to be cooling faster than anticipated, Fed officials have signaled that they're ready to start cutting rates.
If the labor market weakens further in the coming months, it's possible central bankers will opt for a larger half-point cut at one or both of their meetings in November and December. But for the September meeting, a quarter-point decrease is looking to be the most likely outcome, according to the CME FedWatch Tool .
This means that, while mortgage rates should continue to ease this year, we may not see them drop as quickly as they have in the last few weeks.
What Are Today's Mortgage Rates?
What Are Today's Refinance Rates?
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Use our free mortgage calculator to see how today's interest rates will affect your monthly payments.
By clicking on "More details," you'll also see how much you'll pay over the entire length of your mortgage, including how much goes toward the principal vs. interest.
Current 30-Year Mortgage Rates
Average 30-year mortgage rates have inched down this week and are now hovering near 5.7%, according to Zillow data. Rates have been dropping for several months now, and they averaged around 6.05% in August.
The 30-year fixed-rate mortgage is the most popular 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, like a 15-year mortgage.
Current 15-Year Mortgage Rates
Average 15-year mortgage rates are around 5%, according to Zillow data. In August, 15-year rates averaged 5.38%, but they've been trending lower so far this month.
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.
Current Mortgage Refinance Rates
Refinance rates have also been lower in September. Last month, 30-year refinance rates averaged 6.59%, while 15-year refinance rates were around 5.90%. These rates are even lower today.
How Much Do Mortgage Rates Need to Drop to Refinance?
If you're wondering if you should refinance now that mortgage rates have dropped a bit, you'll need to crunch the numbers to see if it makes sense. Some experts advise only refinancing if you can reduce your rate by a percentage point or more, but it really comes down to whether it works for your individual circumstances.
If you can save enough each month by refinancing that you can recoup your costs in a reasonable amount of time, it might be worth it. You can calculate this by dividing your closing costs by the amount you're saving on your monthly mortgage payment . So, if you paid $3,000 to refinance and were able to lower your monthly payment by $200, it would take you 15 months to break even on your refinance.
5-Year Mortgage Rate Trends
Here's how 30-year and 15-year mortgage rates have trended over the last five years, according to Freddie Mac data.
What Factors Influence Mortgage Rates?
Mortgage rates are determined by a variety of different factors, including larger economic trends, Federal Reserve policy, your state's current mortgage rates , the type of loan you're getting, and your personal financial profile.
While many of these factors are out of your control, you can work on improving your credit score , paying off debt, and saving for a larger down payment to ensure you get the best rate possible.
How Does the Fed Rate Affect Mortgage Rates?
The Fed increased the federal funds rate dramatically in 2022 and 2023 to try to slow economic growth and get inflation under control. Inflation has since slowed significantly, but it's still a bit above the Fed's 2% target rate.
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 policy to affect the broader economy.
Fed officials have indicated that they will likely start cutting rates soon. This should help mortgage rates trend down in the coming months.
Will Mortgage Rates Drop in September 2024?
Rates have been inching down for several weeks now, and it's possible that they will drop further in September. Rates have been trending down as the economy cools and the Fed gears up to start cutting the federal funds rate. At its meeting later this month, the central bank is expected to lower rates by at least a quarter point.
Because markets are already anticipating that the Fed will lower rates, mortgage rates might not drop much in response to a Fed rate cut. But if incoming data suggests that the economy is weakening, mortgage rates could fall more substantially — especially if the data pushes the Fed to make a larger half-point cut.
How Low Will Mortgage Rates Go?
Mortgage rates are unlikely to drop back down to the historic lows of 2020 and 2021, when 30-year fixed rates fell below 3%. But rates are expected to continue to ease throughout the next year or two, and it's possible rates could ultimately settle in closer to 5% in a few years.
Will Mortgage Rates Go Down in 2025?
Most major forecasts expect mortgage rates to go down throughout 2025 as the Fed continues to lower its benchmark rate. But because mortgage rates are influenced by the economy, this forecast could change depending on how the economy evolves in 2025.
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