Mortgage rates continue to fall after Fed rate cut. Mortgage rates today, September 20, 2024

For a 30-year fixed-rate mortgage, the average rate you’ll pay today is 6.16%, down -0.16% from last week. The average rate for a 15-year fixed-rate mortgage is 5.38%, down -0.19% from the same period last week. For a closer look at this week’s mortgage forecasts, see here.

The Federal Reserve cut interest rates for the first time in four years on September 18. inflation With interest rates at their lowest levels since spring 2021 and the labor market weakening, the Fed is now focused on maintaining the balance between stable prices and maximum employment.

This initial 0.5% cut, along with potential additional cuts next year, should help drive mortgage rates lower and encourage more potential homebuyers to come off the sidelines. But lower mortgage rates alone won’t fix the current housing market, which is also challenged by high home prices and low inventory.

The Federal Reserve is starting to cut interest rates, and mortgage rates are already lower. Get the best rate for your situation by comparing multiple loan offers from different lenders. Get a customized quote from one of CNET’s partner lenders by entering your information below.

About these rates: Like CNET, Bankrate is owned by Red Ventures. This tool includes partner rates from lenders that you can use when comparing multiple mortgage rates.

What do I need to know about the current mortgage interest rate?

In recent years, the Fed has raised its benchmark interest rate several times to combat inflation, and mortgage rates have risen in response, topping 8% late last year. Mortgage rates aren’t just influenced by the central bank’s monetary policy. They fluctuate daily in response to a range of economic factors, including the bond market, investor expectations, inflation and labor data.

Many homebuyers expected lower mortgage rates at the start of the year, but mortgage lending remained stubbornly high. In August, rates finally fell significantly, continuing a downward trend as the market anticipated an impending rate cut. The average rate on a 30-year fixed mortgage is now around 6.2%, the lowest level since early 2023.

Now that the Fed has officially started cutting rates, mortgage rates are expected to continue to fall. However, experts stress that this will be a gradual process. The Fed will not cut rates all at once, or very quickly, unless there are signs of an impending economic crisis.

In his comments After the Sept. 18 policy meeting, Fed Chairman Jerome Powell said, “If we normalize interest rates, you will see the housing market normalize.” However, he also conceded that the other problems plaguing the housing market — high home prices and low inventory — cannot be solved by the central bank.

See the graph below for an overview of the development of mortgage rates over the past four years.

Will we get lower mortgage rates in 2024?

Mortgage rates have already fallen about 1% from their 2024 peak. After the first 0.5% rate cut in September, the Fed predicts another half-point cut this year, with additional cuts in 2025.

“Mortgage rates have been on a downward trend since late July 2024, and that will likely continue as the Fed cuts rates for the rest of this year,” said Matt Vernonhead of consumer lending at Bank of America.

Based on current forecasts, we could see the average 30-year fixed mortgage rate fall to 6% by the end of the year. But there is always room for volatility in the mortgage market. If future inflation figures or labor market reports show the economy is slowing too much, the Fed could be forced to make larger and/or more frequent rate cuts. That could cause a larger decline in mortgage rates.

Still, many potential buyers who have been priced out of the market will continue to wait for mortgage rates to fall a few more percentage points. Experts also warn that a return to the 2-3% mortgage rates of a few years ago is unlikely.

Below you can see where some major housing authorities expect the average mortgage rate to end up.

What different types of mortgages are there?

Every mortgage has a term or payment schedule. The most common mortgage terms are 15 and 30 years, although mortgages of 10, 20 and 40 years also exist. With a fixed-rate mortgage, the interest rate is fixed for the life of the loan, which provides stability. With a variable-rate mortgage, the interest rate is only fixed for a certain period of time (usually five, seven or 10 years), after which the interest rate is adjusted annually based on the market. Fixed-rate mortgages are a better option if you plan to live in a home for the long term, but variable-rate mortgages can offer lower interest rates up front.

Mortgages with a fixed interest rate of 30 years

The average interest rate for a standard 30-year fixed mortgage is currently 6.16%. A 30-year fixed mortgage is the most common term. This often has a higher interest rate than a 15-year mortgage, but you do pay a lower monthly payment.

Mortgages with a fixed interest rate of 15 years

Today, the average rate for a 15-year fixed mortgage is 5.38%. While you will have a higher monthly payment than a 30-year fixed mortgage, a 15-year loan typically has a lower interest rate, meaning you will pay less interest in the long run and pay off your mortgage sooner.

5/1 variable interest rate mortgages

A 5/1 ARM currently has an average interest rate of 5.83%. You’ll typically get a lower introductory rate with a 5/1 ARM for the first five years of your mortgage. But you could end up paying more after that, depending on how the rate adjusts annually. If you plan to sell or refinance your home within five years, an ARM may be a good option.

Calculate your monthly mortgage payment

Getting a mortgage should always depend on your financial situation and your long-term goals. The most important thing is to create a budget and try to stay within it. CNET’s mortgage calculator below can help homebuyers prepare for monthly mortgage payments.

What are some tips for finding the best mortgage rate?

Although mortgage rates and home prices are high, the housing market won’t remain unaffordable forever. It’s always a good time to save for a down payment and improve your credit score to help you get a competitive mortgage rate when the time is right.

1. Save for a larger down payment: Although a 20% down payment is not required, a higher down payment will mean you take out a smaller mortgage, saving you money on interest.
2. Increase your credit score: You qualify for a conventional mortgage with a credit score of 620, but a higher score of at least 740 will get you better interest rates.
3. Paying off debts: Experts recommend a debt-to-income ratio of 36% or less to help you qualify for the best rates. If you have no other debt, you’ll be better able to handle your monthly payments.
4. Research loans and assistance: Government-sponsored loans have more flexible borrowing requirements than conventional loans. Some government-sponsored or private programs can also help with your down payment and closing costs.
5. Compare different lenders: By researching and comparing multiple mortgage offers from different lenders, you can find the lowest mortgage rate for your situation.