Could the Fed’s rate cut help mortgage rates fall? Today’s mortgage rates, December 17, 2024

In 2024 prospective homebuyers were watching mortgage rates rising, falling, and then rising again. Many hoped the housing market would open up when Federal Reserve it finally started cutting interest rates in September.

Yet a mortgage rates have remained high due to converging macroeconomic factors: strong economic data and concerns about President-elect Donald Trump’s potentially inflationary policies. Mortgage rates have risen over the past two months, but are off to a better start in December.

Today’s average mortgage rates on December 17, 2024. compared to a week ago. We use interest rate data collected by Bankrate as reported by lenders in the US. See all today’s mortgage rates

The average 30-year fixed mortgage rate was 6.79% today, down from -0.01% in the past week. The average rate for a 15-year fixed mortgage was 6.11%, down -0.03% from a week ago.

With inflation slowing and the labor market weakening, the Federal Reserve is poised to make another 0.25% interest rate cut at its Dec. 18 meeting. Experts say this could be the last reduction we see for a while. Depending on how the next administration’s economic policies play out, mortgage rates it could still fall in 2025, although rates are unlikely to fall below 6% for some time.

Check out CNET Money’s weekly mortgage rate forecast for a deeper look at what’s next for Fed rate cuts, jobs data and inflation.

Recent trends in mortgage rates

Although the Fed influences the direction of mortgage rates, it does not set them directly. In fact, mortgage rates tend to move ahead of the Federal Reserve, fluctuating daily in response to various economic indicators, including inflation and labor data, changes in the bond market, investor expectations and geopolitical risks.

Late this summer, mortgage rates declined as worrisome economic indicators (rising unemployment) led investors to believe the Fed would begin cutting rates aggressively. Before the central bank’s half-percentage-point rate cut on September 18, mortgage rates hit their lowest point in roughly two years.

But shortly after the Fed’s September policy meeting, rates began to rise due to strong economic indicators and the election of Donald Trump, whose proposed economic policies could lead to higher deficits and more inflation.

The prospect of increased government spending does not bode well for long-term interest rates such as 30-year fixed mortgages, he said Nicole Ruettsenior vice president of the Rueth team, powered by motion.

While another Fed rate cut of 0.25% this month looks likely, it will not lead to an equal or immediate drop in mortgage rates. The Fed is also likely to slow the pace of rate cuts in 2025, they said Sam Williamsonsenior economist at First American Financial Corporation, which would keep pressure on mortgage rates.

For a look at how mortgage rates have moved over the past four years, see the chart below.

Will mortgage rates fall this year?

Today’s homebuyers have less room in their budgets to afford housing costs due to high mortgage rates and high home prices. Limited housing inventory and low wage growth also contribute affordability crisis and keeping mortgage demand low.

The next development of mortgage rates depends on the performance of the economy in the coming weeks and months. Strong economic data usually leads to higher mortgage rates. The opposite is true when we get weaker data, such as rising unemployment or cooling inflation.

In ours Mortgage forecast for 2025experts have outlined a rough range for mortgages depending on potential economic performance.

If inflationary trends are lower and the labor market is weakeningmortgage rates will have room to fall, potentially in the 5% range. But if Trump’s economic policies cause inflation to heat up again, that could prompt the Fed to delay further rate cuts. In this scenario, mortgage rates could easily remain high or exceed 7%.

Here’s a look at where some major housing authorities expect average mortgage rates to reach.

How can I choose a mortgage term?

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

30 year fixed rate mortgages

The average 30-year fixed mortgage rate today is 6.79%. The 30-year fixed mortgage is the most common loan term. It will often have a higher interest rate than a 15-year mortgage, but you will have a lower monthly payment.

15-year fixed-rate mortgages

Today, the average interest rate for a 15-year fixed mortgage is 6.11%. Although you’ll have a larger monthly payment than a 30-year fixed mortgage, a 15-year loan typically comes with a lower interest rate, allowing you to pay less interest in the long run and pay off your mortgage sooner.

5/1 Adjustable Rate Mortgages

A 5/1 ARM has an average rate of 6.43% today. You’ll typically get a lower introductory rate with a 5/1 ARM for the first five years of the mortgage. But you may pay more after that period, depending on how the rate adjusts annually. If you plan to sell or refinance your house 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 long-term goals. The most important thing is to budget and try to stay within your means. CNET’s Mortgage Calculator below can help homebuyers prepare for monthly mortgage payments.

How can I get the lowest mortgage rates?

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

1. Save for a bigger down payment: Although a 20% down payment is not required, a larger down payment means taking out a smaller mortgage, which will help you save on interest.
2. Increase your credit score: You can qualify for a conventional mortgage with a credit score of 620, but a higher score of at least 740 will get you better rates.
3. Pay off the debt: Experts recommend a debt-to-income ratio of 36% or less to help you qualify for the best rates. Having no other debt will put you in a better position to handle your monthly payments.
4. Loans and research 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. Search lenders: Researching and comparing multiple loan offers from different lenders can help you secure the lowest mortgage rate for your situation.