Mortgage Rates Dip Slightly: What You Need to Know
Current Mortgage Rates
As of today, mortgage rates have taken a slight dip. According to Zillow, the 30-year fixed mortgage rate has decreased by three basis points to 6.64%, while the 15-year fixed interest rate remains unchanged at 6.03%.
Federal Reserve’s Impact on Mortgage Rates
In December, the Federal Reserve cut the federal funds rate by 25 basis points, marking its third rate cut of the year. Although this decrease has already been factored into current mortgage interest rates, the Fed is expected to make two additional rate cuts in 2025, which should lead to a gradual decline in mortgage rates next year.
Understanding Mortgage Rates
When comparing 15- versus 30-year mortgage rates, it’s essential to consider the trade-offs. While 15-year mortgage rates are typically lower, they come with higher monthly payments. For example, a $400,000 mortgage with a 30-year term and a 6.64% rate would result in a monthly payment of about $2,565, whereas a 15-year mortgage with a 6.03% rate would require a monthly payment of around $3,382. However, the 15-year mortgage would save you $314,732 in interest over the life of the loan.
Fixed-Rate vs. Adjustable-Rate Mortgages
Fixed-rate mortgages offer a locked-in rate from day one, while adjustable-rate mortgages come with a set period of fixed rates before adjusting based on economic factors. Adjustable rates may start lower, but they can increase over time, making fixed-rate mortgages a more stable option.
Mortgage Rate Trends
Mortgage rates have been trending downward since early August, with occasional increases. The Federal Reserve’s decisions on the federal funds rate will largely influence the trajectory of future mortgage rates. Currently, it’s expected that the Fed will cut its target rate twice in 2025, which could lead to lower mortgage rates.
Refinance Mortgage Rates
Refinance mortgage rates are currently higher than purchase rates, with a 30-year fixed refinance rate of 6.73%. However, refinancing could still land you a lower rate, depending on your personal finances and current mortgage terms.
What’s Next for Mortgage Rates?
While mortgage rates may not drop significantly in 2024, they could gradually decrease throughout 2025. Keeping an eye on inflation and the Federal Reserve’s decisions will help you prepare for where interest rates are headed.
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