Mortgage Rates on the Rise: What’s Ahead for 2025?
As of today, mortgage rates have taken a slight upward turn. According to Zillow, the average 30-year fixed interest rate has increased by six basis points to 6.70%, while the 15-year mortgage rate has risen by seven basis points to 6.10%. But what does this mean for home buyers looking to enter the market in 2025?
A Glimmer of Hope for 2025
Fannie Mae’s December Housing Forecast predicts that the 30-year fixed rate will hover around 6.60% in Q1 2025 and end the year at 6.20%. The Mortgage Bankers Association also expects a 6.60% 30-year fixed rate at the beginning of 2025, but predicts it will sit at 6.40% in Q4. This suggests that home buyers may see some relief with rates in 2025, although it’s essential to be financially prepared to take advantage of these rates.
Current Mortgage Rates
Here are the current mortgage rates, according to the latest Zillow data:
- 30-year fixed: 6.70%
- 20-year fixed: 6.56%
- 15-year fixed: 6.10%
- 5/1 ARM: 6.71%
- 7/1 ARM: 6.63%
- 30-year VA: 6.14%
- 15-year VA: 5.74%
- 5/1 VA: 6.25%
Understanding Mortgage Rates
A mortgage interest rate is a fee for borrowing money from your lender, expressed as a percentage. There are two basic types of mortgage rates: fixed and adjustable rates. Fixed-rate mortgages lock in your rate for the entire life of your loan, while adjustable-rate mortgages keep your rate the same for the first few years, then change it periodically.
Factors Affecting Mortgage Rates
Mortgage rates are influenced by two categories: factors you can control and those you cannot. You can control your credit score, debt-to-income ratio, and down payment, which can impact the rate you’re offered. On the other hand, the economy plays a significant role in determining mortgage rates. When the economy is struggling, rates tend to decrease to encourage borrowing, while a strong economy leads to higher rates.
Refinance Mortgage Rates
Here are today’s mortgage refinance interest rates, according to the latest Zillow data:
- 30-year fixed: 6.69%
- 20-year fixed: 6.60%
- 15-year fixed: 6.05%
- 5/1 ARM: 6.04%
- 7/1 ARM: 6.64%
- 30-year VA: 6.03%
- 15-year VA: 5.80%
- 5/1 VA: 6.31%
Calculating Your Monthly Payments
Our mortgage payment calculator can help you estimate your monthly payments, taking into account factors like homeowners insurance, property taxes, and private mortgage insurance costs. This will give you a realistic idea of what your monthly payment could be.
Choosing the Right Mortgage Term
Two of the most common mortgage terms are 30-year and 15-year fixed-rate mortgages. A 30-year mortgage offers relatively low monthly payments but comes with a higher interest rate and more interest paid over the life of the loan. A 15-year mortgage has a lower rate, but higher monthly payments.
Shopping for the Best Rate
It’s essential to shop around for the best rate with banks, credit unions, and companies specializing in mortgage lending. According to 2023 Home Mortgage Disclosure Act (HMDA) data, some of the banks with the lowest median mortgage rates are Citibank, Wells Fargo, and USAA.
Refinancing: Is It Worth It?
Some experts recommend refinancing when you can lock in a rate that’s 2% less than your current mortgage rate. Others say 1% is the magic number. It all depends on your financial goals and break-even point after paying refinance closing costs.
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