US Mortgage Rates 16 Months Low and What It Means for You

US mortgage rates have reached a 16-month low, which is great news for homebuyers and refinancers. This means that borrowing money to buy or improve a home is cheaper than it has been in a long time.

The average 30-year fixed mortgage rate is currently around 3.75%, which is a significant drop from the 4.5% rate seen just a few months ago. This rate decrease can save borrowers hundreds of dollars per year on their mortgage payments.

For example, a borrower who takes out a $200,000 mortgage at 4.5% would pay around $1,073 per month. But with a rate of 3.75%, that same borrower would pay around $943 per month, a savings of $130 per month.

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Mortgage rates have been declining for seven straight weeks, the longest such stretch since 2018-2019, with the contract rate on a 30-year fixed mortgage dropping 14 basis points to 6.15% in the week ended Sept. 13.

The average contract rate on a 15-year mortgage slid 29 basis points to 5.42%, also the lowest in two years. This trend is expected to continue, with the yield on the 10-year Treasury note hovering near the lowest level since mid-2023.

Cheaper borrowing costs have driven a 5.4% advance in the group's home-purchase applications index to a three-month high. This is a great opportunity for homebuyers to take advantage of lower rates and make their dream of homeownership a reality.

If you're considering a 15-year mortgage, you might be wondering if rates will continue to fall. Since crossing above the 6.4 percent mark in April this year, 15-year mortgage rates have trended downward, but the consensus is that rates appear to be stable.

To get the best possible mortgage rate, compare loan offers from multiple lenders. You can get preapproved and receive rate quotes from at least three mortgage lenders on the same day to have an accurate basis for comparison.

Here are the national averages of lenders' best rates for new purchase mortgages as of today:

Keep in mind that these rates are subject to change and may not reflect the actual rate you'll qualify for. It's essential to compare rates from multiple lenders and consider factors like your credit score, debt-to-income ratio, and down payment to get the best possible deal.

The Federal Reserve's interest rate decisions have a significant impact on the US mortgage market. The Fed began raising interest rates in 2021 to control inflation, which had peaked at about 9% in 2022.

Inflation has since slowed dramatically, but the job market has slowed as well, with a weaker-than-expected jobs report in each of the last two months. The unemployment rate has ticked up this year from 3.7% to 4.2%.

Lower interest rates can help stimulate economic activity and boost employment, which is why the Fed is now focusing on ensuring a healthy job market. The Fed has been guided by data, and inflation numbers in the last few months have started looking good.

Consider reading: Mortgage and Refinance Rates Have Fallen over the Last Week.

The Federal Reserve is expected to cut interest rates, and it's all because of a shift in focus. Inflation has slowed down dramatically from 9% in 2022 to a slightly higher rate than the Fed's target of 2%.

A weaker-than-expected jobs report has stoked concern among economists. The unemployment rate has ticked up this year from 3.7% to 4.2%. In theory, lower interest rates help stimulate economic activity and boost employment.

The Fed has been guided by data, and inflation numbers have started looking good. Inflation is no longer the top priority, and the focus has shifted to ensuring a healthy job market.

Take a look at this: Inflation Report Mortgage Rates Today

Federal Reserve leaders are expected to cut a key interest rate Wednesday, and mortgage rates have already started to decline in anticipation.

The contract rate on a 30-year fixed mortgage dropped 14 basis points to 6.15% in the week ended Sept. 13, the lowest level since September 2022.

This decline in mortgage rates has led to an influx of applications for home purchases and refinancing, with the contract rate on a 15-year mortgage sliding 29 basis points to 5.42%, also the lowest in two years.

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Cheaper borrowing costs have driven a 5.4% advance in the group’s home-purchase applications index to a three-month high, and the refinancing gauge surged more than 24% to the highest level since April 2022.

Market observers are divided over whether the Fed will impose its typical cut of a quarter of a percentage point or opt for a larger half-point cut, with the CME FedWatch Tool estimating the probability of a quarter-point cut at 51% and the odds of a half-point cut at 49%.

The current mortgage rates are showing a downward trend, with the national average 15-year fixed mortgage interest rate at 6.30% as of Monday, January 06, 2025.

This rate is down compared to last week's 6.34%, indicating a positive shift in the market. The national average 15-year fixed refinance interest rate is also at 6.33%, down from last week's 6.34%.

Here's a breakdown of the current mortgage rates:

15 year fixed: 6.32%

30 year fixed: 7.01%

10 year fixed: 6.24%

5/1 ARM: 6.51%

Today's new purchase mortgage rates are worth keeping an eye on. The average 30-year fixed rate has risen to 6.33%, a 5 basis point increase from yesterday.

The 30-year fixed rate is still relatively low, considering it's only a few points above the 6.28% reading we saw on August 5, which was the cheapest average since April 2023.

The 15-year fixed rate has also increased, with a 6 basis point jump to 5.43%. This is just a bit above the 5.32% reading from earlier this month, which was the lowest 15-year reading since February 2023.

Here's a breakdown of the national averages of lenders' best rates for new purchase mortgages:

Jumbo 30-year rates have actually dipped slightly, down 2 basis points to 6.54%. This is still a relatively low rate compared to the historic 8.14% peak seen last fall.

The Freddie Mac average, a weekly measure of 30-year mortgage rates, dipped to 6.46% last week, a minor 3 basis point decrease. This is still far below the historic 23-year peak of 7.79% reached last October.

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The 15-year fixed rate mortgage is a popular option, with an interest rate of 6.30% and an APR of 6.38% as of Monday, January 06, 2025. This rate is down compared to last week's rate of 6.34%.

The 30-year fixed rate mortgage has a higher interest rate, at 7.00%, and an APR of 7.05%. This rate is also subject to change, so it's essential to shop around for the best deal.

The 5-1 ARM has an interest rate of 6.53% and an APR of 7.14%, making it a more expensive option. However, it's worth considering if you plan to move or refinance in the near future.

The 30-year fixed rate FHA mortgage has an interest rate of 6.96% and an APR of 7.01%. This option is geared towards first-time homebuyers or those with lower credit scores.

The 30-year fixed rate VA mortgage has an interest rate of 6.78% and an APR of 6.82%. This option is exclusive to veterans and active-duty military personnel.

A unique perspective: Mortgage Rates Have Ticked Back down to below 7

Here's a summary of the current interest rates for different loan types:

Remember, these rates are subject to change, so it's essential to shop around and compare offers from multiple lenders to find the best deal for your needs.

If you're considering a 15-year mortgage, you'll want to think carefully about your budget and debt comfort level. Can you afford the higher monthly payments that come with a shorter loan term?

It's also worth considering how you feel about debt. If you're comfortable using debt as a financial tool, a 30-year loan might be the way to go. But if you prefer paying off your mortgage quickly, a 15-year term might be a better fit.

Ultimately, the decision between a 15-year and a 30-year mortgage comes down to your individual financial goals and priorities.

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So, you're thinking about getting a loan, and you want to know if it's the right choice for you. It's essential to consider two key questions: Can you afford the higher monthly mortgage payments, and how do you feel about debt? If you're already stretching to fit a 30-year mortgage payment into your budget, it might be better to stick with the longer term.

Your comfort level with debt is also a crucial factor. If you're okay with using debt as a financial tool, a 30-year loan might make more sense. On the other hand, if you prefer paying down the mortgage more quickly, a 15-year term option is worth exploring.

Here are some key considerations to keep in mind:

Ultimately, the decision to get a loan depends on your individual financial situation and goals. Take your time, weigh the pros and cons, and consider what will work best for you.

Refinancing and Loans can be a complex and overwhelming process, but understanding the pros of different loan options can make a big difference. A 15-year mortgage is a great option for those who want to build equity quickly.

You'll pay less interest with a 15-year loan, which can save you thousands of dollars over the life of the loan. Rates on 15-year loans are typically lower than rates on 30-year loans.

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A larger chunk of your monthly payments will go toward the loan principal rather than interest, which means you'll be paying down your balance faster. This is especially true for those who make timely payments.

Here are some key benefits of a 15-year mortgage:

Refinancing a loan can be a smart financial move, especially if you're more than halfway through your loan term. You can refinance into a 15-year mortgage with a lower rate to save thousands in interest.

Bankrate's calculator can help you decide if a 15-year mortgage is right for you. Keep in mind that rates have shifted dramatically over the past few years, so if you bought your home recently, today's rates might be more daunting.

15-year mortgages have higher monthly payments due to the shorter term, but depending on your loan balance, your monthly payment might not increase as much as you think.

Shopping around for rates and comparing offers, including lender fees, is crucial when refinancing your loan.

See what others are reading: Mortgage Refinancing Activity Rises as Rates Drop.