Mortgage Interest Rates Today, August 25, 2024

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Mortgage rates inched down following a Friday speech from Federal Reserve Chair Jerome Powell that indicated central bankers are ready to start lowering the federal funds rate.

Average 30-year mortgage rates have been hovering in the low 6% range in recent weeks thanks to cooling economic data that raised expectations of an impending Fed cut. Powell’s comments all but confirm that the Fed will start lowering rates at its next meeting in September. 

But it’s unclear how quickly the Fed will move. In his speech, Powell said that “the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks.”

One of the main indicators the Fed has been watching is the strength of the labor market. If August’s jobs report shows a weakening, we could see Fed officials opt for a larger, 50-basis-point cut. 

Mortgage rates could drop a bit further if the Fed moves more aggressively in September. But at the moment, traders are betting that the Fed will lower rates by 100 basis points by the end of the year. If economic conditions hold steady and the central bank opts to move more slowly than this, it’s possible mortgage rates could tick up slightly.

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Use our free mortgage calculator to see how today’s interest rates will affect your monthly payments.

By clicking on “More details,” you’ll also see how much you’ll pay over the entire length of your mortgage, including how much goes toward the principal vs. interest.

30-Year Fixed Mortgage Rates

Last week’s average 30-year fixed mortgage rate was 6.46%, according to Freddie Mac. This is a three-basis-point decrease from the previous week.

The 30-year fixed-rate mortgage is the most common type of home loan. With this type of mortgage, you’ll pay back what you borrowed over 30 years, and your interest rate won’t change for the life of the loan.

The lengthy 30-year term allows you to spread out your payments over a long period of time, meaning you can keep your monthly payments lower and more manageable. The trade-off is that you’ll have a higher rate than you would with shorter terms or adjustable rates. 

15-Year Fixed Mortgage Rates

Average 15-year mortgage rates fell to 5.62% last week, according to Freddie Mac data. This is a four-basis-point decrease from the week before.

If you want the predictability that comes with a fixed rate but are looking to spend less on interest over the life of your loan, a 15-year fixed-rate mortgage might be a good fit for you. Because these terms are shorter and have lower rates than 30-year fixed-rate mortgages, you could potentially save tens of thousands of dollars in interest. However, you’ll have a higher monthly payment than you would with a longer term.

How Do Fed Rate Hikes Affect Mortgages?

The Federal Reserve increased the federal funds rate dramatically to try to slow economic growth and get inflation under control. So far, inflation has slowed significantly, but it’s still a bit above the Fed’s 2% target rate.

Mortgage rates aren’t directly impacted by changes to the federal funds rate, but they often trend up or down ahead of Fed policy moves. This is because mortgage rates change based on investor demand for mortgage-backed securities, and this demand is often impacted by how investors expect Fed hikes to affect the broader economy. 

The Fed has indicated that it will likely start cutting this year. This would allow mortgage rates to trend down in the coming months.

When Will Mortgage Rates Go Down?

Mortgage rates increased dramatically over the last two years, but they’re expected to go down at some point this year.

In July 2024, the Consumer Price Index rose 2.9% year-over-year. Inflation has slowed significantly since it peaked last year, which means mortgage rates could fall further in the coming months.

For homeowners looking to leverage their home’s value to cover a big purchase — such as a home renovation — a home equity line of credit (HELOC) may be a good option while we wait for mortgage rates to ease. Check out some of our best HELOC lenders to start your search for the right loan for you.

A HELOC is a line of credit that lets you borrow against the equity in your home. It works similarly to a credit card in that you borrow what you need rather than getting the full amount you’re borrowing in a lump sum. It also lets you tap into the money you have in your home without replacing your entire mortgage, like you’d do with a cash-out refinance.

Current HELOC rates are relatively low compared to other loan options, including credit cards and personal loans.