close
close

Mortgage rates have fallen by a notable percentage point since July 1

Key findings

  • Interest rates for 30-year fixed-rate mortgages have been falling steadily since the end of April.
  • Since July 1, the decline has been particularly sharp: it has fallen by a full percentage point, from 7.08% then to an average of 6.08% today.
  • Interest rates for new purchases over 30 years and over 15 years are currently at their lowest levels in 19 months.
  • Refinancing rates have also fallen, with the average 30-year refinancing rate at its lowest level since February 2023.
  • Although the Fed funds rate does not directly affect mortgage rates, they could fall further as a result of a series of Fed rate cuts beginning on September 18.

You can find the full article under these offers from our partners.

Mortgage interest rates have been falling for months

After suffering through the worst mortgage rates in over 20 years last fall, homebuyers can look forward to great relief in 2024. And lately, the amount of good news has increased significantly.

Although they were significantly better than the peak average of 8.01% we saw last October, 30-year mortgage rates still averaged 7.37% at the end of April. But in the four and a half months since then, rates have fallen significantly. After an initial slight decline, the 30-year average fell to 7.08% by July 1.

But then things got more interesting. On 48 market days from July 1 to September 10, 30-year mortgage rates fell. As a result, the benchmark interest rate lost a full percentage point – from 7.08% on July 1 to the current average of 6.08%. The current level is the lowest since February 2023.

Meanwhile, interest rates on 15-year fixed-rate mortgages have fallen even further. On July 1, the average interest rate for 15-year new purchases was 6.24 percent. Today it has fallen to 5.13 percent, also the lowest level since February 2023.

How 1 percent can affect your monthly payment

Based on the median home price in the U.S. for August of around $430,000 and assuming a 20 percent down payment, the monthly principal and interest payment on a loan with the average interest rate of 7.08 percent would have been $2,307 as of July 1. After the one percentage point reduction to 6.08%, your monthly payment today would be $2,080 – a savings of $227 per month thanks to the lower mortgage rate.

Refinancing rates are also much lower

New-acquisition mortgages aren't the only loan type to benefit from the recent drop in interest rates. Refinance rates have also dropped dramatically, particularly in August. On July 1, the average refinance rate on 30-year bonds was 7.14%. Since then, it has fallen to a current average of 6.29%. While it's not a full percentage point drop like we've seen in new-acquisition rates, the summer drop in refinance rates has brought them to their lowest level in 19 months.

The Fed's upcoming rate cuts could lower mortgage rates

It's possible that mortgage rates will continue to fall for some time. One reason is that the Federal Reserve is expected to begin a series of rate cuts starting September 18. The benchmark interest rate is at its highest level in 23 years, thanks to an aggressive Fed rate-hiking campaign to curb inflation in the wake of the pandemic. However, now that inflation has cooled, the central bank is ready to cut its key interest rate from that peak.

The prime rate does not directly affect mortgage rates—the two can and sometimes do move in opposite directions. However, the prime rate is an important component in a complex interplay of macroeconomic and industry factors that affect the direction of mortgage rates.

The anticipation of the Fed's upcoming rate cut alone appears to have already had an impact on mortgage rates. And with next week's rate cut expected to be one of several in 2024 and 2025, homebuyers have reason to be optimistic that mortgage rates could continue to fall.

The best week to buy a house is coming

Positive seasonal impacts are likely in the coming weeks. According to analysis by Realtor.com, historical trends show that home prices will fall and more options will be available during the week of September 29th to October 5th.

How we track mortgage rates

The national and state averages above are provided as is through the Zillow Mortgage API, assuming a loan-to-value (LTV) of 80% (i.e., a minimum 20% down payment) and an applicant credit score in the range of 680-739. The resulting rates represent what borrowers should expect when receiving offers from lenders based on their qualifications, which may vary from advertised enticement rates. © Zillow, Inc., 2024. Use subject to Zillow's Terms of Service.

You may also like...