Mortgage rates began falling late this summer as worrying economic indicators (rising unemployment) led investors to believe the Federal Reserve would begin cutting rates. Leading up to the Fed’s Sept. 18 jumbo rate cut, mortgage rates had reached their lowest point in roughly two years. However, since then, rates have increased rapidly in response to strong economic data, specifically September’s labor report, even while inflation continues to ease.
Check out our weekly mortgage forecast for a more in-depth look at what’s next for Fed rate cuts, labor data and inflation.
The average interest rate for a standard 30-year fixed mortgage is 6.55% today, an increase of 0.09% from seven days ago. The average rate for a 15-year fixed mortgage is 5.89%, which is an increase of 0.11% since last week.
Financial markets anticipate that the Fed will take a cautious approach to interest rate adjustments, implementing smaller 0.25% rate reductions at a slower pace. The path to lower mortgage rates is going to be bumpy and long, particularly if we continue to get positive or even mixed economic data in the coming months.
Today’s average mortgage rates
Mortgage rates constantly change, but there’s a good chance they’ll fall this year. To get the lowest rate, shop around and compare offers from different lenders. Enter your information below to get a custom quote from one of CNET’s partner lenders.
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Current mortgage rate trends
Over the last few years, the Fed increased its benchmark interest rate multiple times to combat inflation, and mortgage rates soared in response, reaching past 8% late last year. Though the Fed doesn’t set mortgage rates directly, they’re influenced by the central bank’s monetary policy. Borrowing rates for mortgages also fluctuate daily in response to a range of economic factors, including the bond market, investor expectations, inflation and labor data..
Many homebuyers expected lower mortgage rates at the start of 2024, but rates have remained stubbornly high throughout the year.
Now that the Fed has officially pivoted to rate cuts, mortgage rates are expected to ease slowly with some volatility along the way. In his remarks following the Sept. 18 policy meeting, Fed Chair Jerome Powell said, “As we normalize rates, you’ll see the housing market normalize.” However, he also admitted that the other problems plaguing the housing market -- high home prices and low inventory -- aren’t fixable by the central bank.
For a look at mortgage rate movement over the past four years, see the chart below.
After the first 0.5% rate reduction in September, the Fed is expected to cut interest rates by 0.25% in November. Depending on the incoming economic data, we could see another 0.25% at the central bank’s final policy meeting of the year in December.
Based on current forecasts, the average 30-year fixed mortgage rates could drop to 6% by the end of the year. But there’s always room for volatility in the mortgage market. If future inflation data or labor market reports show the economy softening too much, the Fed may be forced to make larger and/or more frequent rate cuts, which could cause a dip in mortgage rates.
Overall, experts stress that we are far from an affordable housing market and that lower mortgage rates won’t come overnight. They also warn that a return to the 2-3% mortgage rates from just a few years ago is unlikely.
Here’s a look at where some major housing authorities expect average mortgage rates to land.
Which mortgage term and type should I pick?
Each mortgage has a loan term, or payment schedule. The most common mortgage terms are 15 and 30 years, although 10-, 20- and 40-year mortgages also exist. With a fixed-rate mortgage, the interest rate is set for the duration of the loan, offering stability. With an adjustable-rate mortgage, the interest rate is only fixed for a certain amount of time (commonly five, seven or 10 years), after which the rate adjusts annually based on the market. Fixed-rate mortgages are a better option if you plan to live in a home in the long term, but adjustable-rate mortgages may offer lower interest rates upfront.
30-year fixed-rate mortgages
The average interest rate for a standard 30-year fixed mortgage is 6.55% today. A 30-year fixed mortgage is the most common loan term. It will often have a higher interest rate than a 15-year mortgage, but you’ll have a lower monthly payment.
15-year fixed-rate mortgages
Today, the average rate for a 15-year, fixed mortgage is 5.89%. Though you’ll have a bigger monthly payment than a 30-year fixed mortgage, a 15-year loan usually comes with a lower interest rate, allowing you to pay less interest in the long run and pay off your mortgage sooner.
5/1 adjustable-rate mortgages
A 5/1 ARM has an average rate of 6.04% today. You’ll typically get a lower introductory interest rate with a 5/1 ARM in the first five years of the mortgage. But you could pay more after that period, depending on how the rate adjusts annually. If you plan to sell or refinance your house within five years, an ARM could be a good option.
Calculate your monthly mortgage payment
Getting a mortgage should always depend on your financial situation and long-term goals. The most important thing is to make a budget and try to stay within your means. CNET’s mortgage calculator below can help homebuyers prepare for monthly mortgage payments.
How can I get the lowest mortgage rates?
Though mortgage rates and home prices are high, the housing market won’t be unaffordable forever. It’s always a good time to save for a down payment and improve your credit score to help you secure a competitive mortgage rate when the time is right.
Save for a bigger down payment: Though a 20% down payment isn’t required, a larger upfront payment means taking out a smaller mortgage, which will help you save in interest. Boost your credit score: You can qualify for a conventional mortgage with a 620 credit score, but a higher score of at least 740 will get you better rates. Pay off debt: Experts recommend a debt-to-income ratio of 36% or less to help you qualify for the best rates. Not carrying other debt will put you in a better position to handle your monthly payments. Research loans and assistance: Government-sponsored loans have more flexible borrowing requirements than conventional loans. Some government-sponsored or private programs can also help with your down payment and closing costs. Shop around for lenders: Researching and comparing multiple loan offers from different lenders can help you secure the lowest mortgage rate for your situation.