Mortgage Rates Take a Dip: What’s Next?
The latest mortgage rate update from Zillow shows a slight decrease in rates, with the average 30-year fixed rate dropping to 6.67% and the 15-year fixed rate falling to 5.97%. But what does this mean for homebuyers and refinancers?
The Federal Reserve’s Impact on Mortgage Rates
While experts don’t predict a fed funds rate cut at the next few meetings, positive comments from Fed Chair Jerome Powell about the year’s outlook could lead to a decrease in mortgage rates. However, the Fed’s decision on the federal funds rate will largely influence the trajectory of future mortgage rates.
Current Mortgage Rates
Here are the current mortgage rates, according to Zillow data:
- 30-year fixed: 6.67%
- 20-year fixed: 6.40%
- 15-year fixed: 5.97%
- 5/1 ARM: 6.65%
- 7/1 ARM: 6.58%
- 30-year VA: 6.10%
- 15-year VA: 5.52%
- 5/1 VA: 6.05%
Understanding Refinance Rates
Refinance rates are usually higher than purchase rates. Here are the current refinance rates, according to Zillow data:
- 30-year fixed: 6.71%
- 20-year fixed: 6.53%
- 15-year fixed: 6.05%
- 5/1 ARM: 6.65%
- 7/1 ARM: 6.69%
- 30-year VA: 6.12%
- 15-year VA: 5.88%
- 5/1 VA: 6.02%
- 30-year FHA: 6.27%
- 15-year FHA: 6.13%
The Benefits of a 15-Year Mortgage
While 15-year mortgage rates are lower than 30-year rates, the shorter term means higher monthly payments. However, you’ll save money on interest in the long run. For example, a $400,000 mortgage with a 30-year term and a 6.67% rate would result in a monthly payment of about $2,573, with a total interest payment of $526,337 over the years. In contrast, a 15-year mortgage with a 5.97% rate would result in a monthly payment of about $3,369, with a total interest payment of $205,411.
The Pros and Cons of Adjustable-Rate Mortgages
Adjustable-rate mortgages can offer lower initial rates, but they come with the risk of increasing rates over time. For example, a 7/1 ARM would lock in your rate for the first seven years, then change every year for the remainder of your term.
What’s Ahead for Mortgage Rates?
Mortgage rates will likely gradually decrease throughout 2025, but the pace of decline may be slower than expected. The Federal Reserve’s decisions on the federal funds rate, as well as inflation and economic trends, will influence the direction of mortgage rates.
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