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Mortgage rates today, May 24, 2024

Mortgage Rates

“Good news for home buyers: 30-year and 15-year fixed mortgage rates have dropped for the third consecutive week. This comes after five weeks of increasing 30-year rates and four weeks of increasing 15-year rates.”

Sam Khater, chief economist at Freddie Mac, referred to the decreases as an “unexpected windfall” in a press release, and the phrasing is accurate. The Mortgage Bankers Association and Fannie Mae recently released their May mortgage rate forecasts, and the organizations predicted higher rates throughout 2024 than in previous monthly forecasts.

Fannie Mae even predicted the average 30-year rate would be at 7.10% in Q2 and Q3 2024, then end the year at 7%. So, a rate drop this week is indeed unexpected. 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.

  • 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 6.94%, which is eight basis points lower than last week and the first time the rate has fallen below 7% in over a month. But it’s still 37 basis points higher than one year ago. The average 15-year mortgage rate is 6.24%. This is four basis points lower than last week and up 27 points since this time last year.

  • 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.

In the early stages of your mortgage, the majority of your monthly payment covers the interest. Although your monthly payment for mortgage principal and interest remains constant over the years, a decreasing portion goes toward interest, with more being allocated to paying off the original loan amount.

  • 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.

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 May housing forecast, the government-sponsored enterprise said it expects 30-year fixed rates to end 2024 at 7%. This could be chalked up to the Fed’s slower approach to cutting the federal funds rate this year than people had previously expected.

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 99% chance that the Fed will not lower its rate at the central bank’s next meeting in mid-June. So even though rates have been inching down, we probably won’t see dramatic drops anytime soon.

By: Laura Grace Tarpley

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