Mortgage rates have increased this week. According to Freddie Mac, the 30 year fixed rate mortgage rose 12 basis points to 6.72% — five basis points higher than this time last year. The good news is that the 30-year rate is still below the November peak of 6.84%.
At this point, the Federal Reserve only plans to cut the federal funds rate twice in 2025. This is a sign that mortgage interest rates could remain relatively high next year. If you're ready to buy a home but are holding out for lower rates, it may not be worth waiting. Focus on improving your finances and shopping for mortgage lenders to get the lowest possible rate.
Dig deeper: How the Federal Reserve's rate decision affects mortgage rates
Here are the current mortgage rates, according to the latest Zillow data:
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30 years fixed: 6.63%
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20 years fixed: 6.63%
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15 years fixed: 5.97%
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5/1 ARM: 6.68%
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7/1 ARM: 6.68%
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VA 30 years: 6.01%
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VA 15 years: 5.58%
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5/1 VA: 6.30%
Remember, these are national averages and rounded to the nearest hundredth.
Learn more: 5 strategies to get the lowest mortgage rates
Here are today's mortgage refinance rates, according to the latest Zillow data:
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30 years fixed: 6.65%
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20 years fixed: 6.60%
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15 years fixed: 5.86%
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5/1 ARM: 6.38%
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7/1 ARM: 6.75%
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VA 30 years: 5.97%
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VA 15 years: 5.76%
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5/1 VA: 5.45%
Again, the numbers provided are national averages rounded to the nearest hundredth. Mortgage refinance rates are often higher than rates when you buy a house, although that's not always the case.
Learn more: Want to refinance your mortgage? Here are 7 home refinance options.
Yahoo Finance has free mortgage payment calculator. Use the calculator to see how different mortgage rates and loan terms could affect your monthly payments.
Our calculator also takes into account homeowners insurance, property taxes, and other expenses that affect your monthly payment. This will give you a better idea of what you would realistically pay in a month than if you were looking at the mortgage principal and interest.
A mortgage interest rate is a fee for borrowing money from your lender, expressed as a percentage. You can choose from two types of rate: fixed or adjustable.
A fixed rate mortgage locks in your rate for the life of your loan. For example, if you get a 30-year mortgage with an interest rate of 6%, your rate will stay at 6% for the entire 30 years unless you refinance or sell.
An adjustable rate mortgage locks your rate for a set period of time and then changes it from time to time. Let's say you get a 7/1 ARM with an introductory rate of 6%. Your rate would be 6% for the first seven years, then the rate would increase or decrease once a year for the last 23 years of your term. Whether your rate goes up or down depends on many factors, such as the economy and the housing market.
At the start of your mortgage term, most of your monthly payment goes towards interest. Your monthly payment towards principal mortgage and interest remains the same throughout the years – however, less and less of your payment goes towards interest, and more goes towards the principal mortgage or the amount you originally borrowed.
Learn more: Adjustable rate versus fixed rate mortgages
A 30 year fixed rate mortgage is a good choice if you want a lower mortgage payment and the predictability that comes with having a fixed rate. Just know that your rate will be higher than if you choose a shorter term and will result in paying a lot more in interest over the years.
You may want to get a 15 year fixed rate mortgage if you want to pay off your home loan quickly and save money on interest. These shorter terms come with lower interest rates, and since you're cutting your repayment time in half, you'll save a lot of interest in the long run. But you'll need to be sure you can comfortably afford the higher monthly payments that come with 15-year terms.
Read more: How to decide between a 15 year and 30 year fixed rate mortgage
Typically, an adjustable rate mortgage could be good if you plan to sell before the introductory rate period ends. Adjustable rates usually start lower than fixed rates, then your rate will change after a predetermined period. However, 5/1 and 7/1 ARM rates are very similar to 30-year fixed rates right now. Before getting an ARM for a lower rate only, compare your rate options from term to term and lender to lender.
Mortgage rates had been broadly stable or increasing since mid-September. However, the 30-year rate finally started to fall three weeks ago, and the 15-year rate has fallen for two straight weeks.
This week, rates have risen again.
Mortgage rates probably won't fall (at least not significantly) before the end of 2024. They may fall in 2025, but because the Fed only anticipates two federal funds rate cuts next year, the reductions will probably be gradual.
Read more: When will the housing market crash again?
According to Freddie Mac, the national average 30-year mortgage rate this week is up 12 basis points to 6.72%, and the average 15-year mortgage rate is up eight basis points to 5.92%.
According to its December housing forecast, Fannie Mae expects the 30-year mortgage rate to end in 2024 at 6.60%. The Mortgage Bankers Association (MBA) has yet to release its December predictions, but its November forecast also puts the 30-year fixed mortgage rate at 6.60% at the end of the year.
There is a good chance that mortgage rates will go down in 2025, not up. However, we will have to see how the next few months shake out as the markets react to the upcoming Trump presidential term and when the Fed decides to cut its rate.