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Mortgage rates today, May 17, 2024: Lower rates give home buyers flexibility
Aspiring homebuyers are finally catching a break — both 30-year and 15-year fixed mortgage rates are down for the second week in a row. This follows five consecutive weeks of 30-year rate increases and four weeks of 15-year increases.
“Given the news that inflation eased slightly, the 10-year Treasury yield dipped, leading to lower mortgage rates," said Sam Khater, chief economist at Freddie Mac, in a press release. "The decrease in rates, albeit small, may provide a bit more wiggle room in the budgets of prospective homebuyers.”
If you are ready to buy a house now, you may want to go ahead and start shopping for homes. Rates are down a bit, and remember: You can always refinance your mortgage later to get an even better rate. But if you aren't in any rush, you might decide to hold out since rates are expected to gradually decrease throughout the rest of 2024.
Learn more: The credit score needed to buy a house in 2024
Current mortgage rates
Mortgage rates are down across the board this week, though the declines aren't overly dramatic. The national average 30-year mortgage rate is 7.02%, which is seven basis points lower than last week — but still 63 basis points higher than one year ago.
The average 15-year mortgage rate is 6.28%. This is 10 basis points lower than last week and up 53 points since this time last year.
Khater mentioned that two straight weeks of rate decreases can give home buyers a little bit "more wiggle room" in their budgets. Let's compare a monthly payment with today's rates to a monthly payment with rates from two weeks ago, when rates were at their highest in months.
Two weeks ago, the 30-year fixed rate was 7.22%. On a $300,000 mortgage, that would come to $2,040 toward your mortgage principal and interest every month. With a 7.02% rate, a mortgage for the same amount would result in a $2,000 monthly payment. By shaving off 20 basis points, you'd save about $40 per month or $480 annually. You'd also pay around $14,500 less in interest over the life of your loan.
How mortgage interest rates work
A mortgage interest rate is a fee for borrowing money from your lender, expressed as a percentage. You can choose from two types of rates: fixed or adjustable.
A fixed-rate mortgage locks in your rate for the entire life of your loan. For example, if you get a 30-year mortgage with a 7% interest rate, your rate will stay at 7% for the entire 30 years unless you refinance or sell.
An adjustable-rate mortgage locks in your rate for a predetermined amount of time and then changes it periodically. 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 per year for the last 23 years of your term. Whether your rate goes up or down depends on several factors, such as the economy and housing market.
At the beginning of your mortgage term, most of your monthly payment goes toward interest. Your monthly payment toward mortgage principal and interest stays the same throughout the years — however, less and less of your payment goes toward interest, and more goes toward the mortgage principal or the amount you originally borrowed.
Learn more: 5 strategies to get the lowest mortgage rates
Which mortgage term length should you get?
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 significantly more in interest over the years.
You might like 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 in 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
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, but there’s always the chance that the rate will increase once the rate-lock period is over. But if you get a 10/1 ARM, for example, and plan to sell before the 10-year period is up, you get to enjoy a lower rate and monthly payment without worrying about your rate increasing later.
Expert predictions for mortgage rates in 2024
In Fannie Mae’s latest rate forecast, the government-sponsored enterprise said it expects 30-year fixed rates to end 2024 at 6.4%.
When the Federal Reserve lowers the federal funds rate, mortgage rates typically go down in response. However, according to the CME FedWatch Tool, there’s roughly a 91% chance that the Fed will not lower its rate at the central bank’s next meeting in mid-June. So we probably won’t see dramatic drops anytime soon. If you’re ready to buy a house but holding out for rates to plummet first, it might not be worth the wait.
Learn more: What the Fed rate decision means for bank accounts, CDs, loans, and credit cards
