Mortgage Rates on the Rise: What It Means for Homebuyers
The latest data from Freddie Mac reveals that the 30-year fixed mortgage rate has increased by 12 basis points to 6.72%, surpassing last year’s rate by five basis points. Although this news may seem discouraging, it’s essential to note that rates are still lower than the November high of 6.84%.
The Federal Reserve’s Impact on Mortgage Rates
The Federal Reserve’s decision to cut the federal funds rate only twice in 2025 signals that mortgage interest rates may remain relatively high next year. This means that homebuyers should focus on improving their finances and shopping around for mortgage lenders to secure the best possible rate.
Current Mortgage Rates
According to Zillow’s latest data, the current national average mortgage rates are:
- 30-year fixed: 6.63%
- 20-year fixed: 6.63%
- 15-year fixed: 5.97%
- 5/1 ARM: 6.68%
- 7/1 ARM: 6.68%
- 30-year VA: 6.01%
- 15-year VA: 5.58%
- 5/1 VA: 6.30%
Mortgage Refinance Rates
For those considering refinancing, the current national average rates are:
- 30-year fixed: 6.65%
- 20-year fixed: 6.60%
- 15-year fixed: 5.86%
- 5/1 ARM: 6.38%
- 7/1 ARM: 6.75%
- 30-year VA: 5.97%
- 15-year VA: 5.76%
- 5/1 VA: 5.45%
Understanding Mortgage Interest Rates
A mortgage interest rate is a fee for borrowing money from your lender, expressed as a percentage. You can choose from two types of rates: fixed or adjustable. A fixed-rate mortgage locks in your rate for the entire life of your loan, while an adjustable-rate mortgage locks in your rate for a predetermined amount of time and then changes it periodically.
Choosing the Right Mortgage
When deciding between a 30-year fixed-rate mortgage and a 15-year fixed-rate mortgage, consider your financial goals and priorities. A 30-year fixed-rate mortgage offers a lower monthly payment and predictability, but you’ll pay more in interest over the years. A 15-year fixed-rate mortgage allows you to pay off your home loan quickly and save money on interest, but you’ll need to be prepared for higher monthly payments.
What’s Next for Mortgage Rates?
Mortgage rates have been mostly stagnant or increasing since mid-September, but there’s a possibility they may drop in 2025. However, with the Federal Reserve predicting only two federal funds rate cuts next year, any decreases will likely be gradual. It’s essential to stay informed about market trends and interest rates to make the best decisions for your financial situation.
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