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- Mortgage rates for September 16, 2024, have dropped to about 5.60%, according to Zillow data.
- Mortgage rates have dropped this month in anticipation of a rate cut from the Fed.
- How much further rates drop depends on the economy and how the Fed responds to cooling labor market conditions.
The Federal Reserve is expected to start lowering rates this week, and mortgage rates are down as a result.
Mortgage rates have been falling this month now that Fed officials have indicated they're ready to start lowering the federal funds rate after keeping it at a two-decade high for over a year to combat high inflation. But will mortgage rates drop further once the Fed cuts rates?
A Fed rate cut has already been priced in, and mortgage rates have trended down further as market expectations have shifted from a quarter-point cut to a half-point decrease. So we may not see mortgage rates go down much further even if the Fed opts for a larger cut.
However, commentary coming out of this meeting could cause mortgage rates to fluctuate. If Fed officials indicate they're considering bigger cuts at their next meetings in November and December, we could see rates fall a bit.
Mortgage rates should continue to go down this year , but how quickly and how much they'll drop depends on the size and pace of the Fed's cuts — which, in turn, largely depends on how the economy evolves in the coming months. If the labor market appears to be weakening, for example, rates could fall faster in anticipation of bigger Fed cuts.
Mortgage Rates Today
Mortgage Refinance Rates Today
Mortgage Calculator
Use our free mortgage calculator to see how today's mortgage rates will affect your monthly and long-term payments.
By plugging in different term lengths and interest rates, you'll see how your monthly payment could change.
30-Year Mortgage Rates
Average 30-year mortgage rates remain around 5.70%, 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.
15-Year Mortgage Rates
Average 15-year mortgage rates inched down last week and are now hovering right 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.
ARM Rates
Rates on adjustable-rate mortgages have been slightly higher than fixed rates recently. Last month, the average mortgage rate for a 7/1 ARM was 6.17%, while the average rate for a 5/1 ARM was 6.22%, according to Zillow data.
When you get an ARM, you'll have a fixed mortgage rate for a certain period of time, after which your rate will adjust periodically. On a 7/1 ARM, for example, your rate will stay fixed for seven years, and then adjust once a year after that until you pay off the loan or refinance.
ARM rates are often (but not always) lower than their fixed-rate counterparts, making an ARM a good deal if you're looking to save on your monthly mortgage payment. But the risk with an ARM is that your monthly payment could increase if rates are up when your rate starts adjusting.
FHA Interest Rates
FHA interest rates were 5.03% last month, and they've been a bit lower in recent weeks.
FHA loans are insured by the Federal Housing Administration. This federal backing allows lenders to work with borrowers with lower credit scores and less money for a down payment, making these loans a good option for low-income and first-time homebuyers . They also typically have lower rates compared to conventional mortgages.
To get an FHA loan, you'll need a credit score of at least 580 and a down payment of 3.5%. If you can afford to put 10% down on a house, you could qualify for an FHA loan with a score down to 500, though not all lenders offer this option.
VA Mortgage Rates
Current VA mortgage rates are in the low 5% range, according to Zillow data. Last month, VA rates averaged 5.39%.
VA loans are available to veterans and military members who meet minimum service requirements. They're backed by the Department of Veterans Affairs, and require no down payment or mortgage insurance .
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%. But 30-year rates are now nearly 70 basis points lower, while 15-year rates are around 50 basis points lower.
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 Affect Mortgage Rates?
The Fed aggressively raised the federal funds rate in 2022 and 2023 to slow economic growth and get inflation under control. As a result, mortgage rates spiked.
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 hikes to affect the broader economy.
Now that it's looking like the Fed will cut rates soon, mortgage rates have dropped. And they could decrease more depending on how quickly the Fed lowers its benchmark rate.
Mortgage Rate Predictions 2025
Mortgage rates have been going down in recent months. But it's unclear how much further they'll drop or where they could ultimately end up.
In general, mortgage rates are expected to continue trending down in 2025 as the Fed lowers its benchmark rate and inflation cools. But that forecast could change depending on how the economy evolves next year. Right now, the Fed is poised to achieve a so-called "soft landing," where it successfully brings inflation back down to its 2% target without sparking an economic downturn. In this scenario, mortgage rates may only decrease moderately in 2025.
But if the economy cools too much and a recession looks likely, rates may fall more substantially. Or, if inflation stops decelerating or ticks back up, mortgage rates could rise.
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