Today’s Mortgage Rates December 23, 2024: 30-Year Rates Spike to 6.93%

Key Takeaways

• Mortgage rates fluctuate on a daily basis because of factors like Federal Reserve policies, economic trends, supply and demand, and inflation.
• The current average mortgage rate on a 30-year fixed-rate mortgage, the most popular home loan, is 6.93%, a 20 basis point jump from the previous week.
• Borrowers looking for a shorter payoff horizon with 15-year fixed mortgages face an average rate of 6.21%, an increase of 17 basis points from a week ago.
• For buyers looking for guaranteed government loans for their dream homes, 30-year fixed FHA mortgages average 7.06%, compared to 6.76% the week prior.
• When getting a mortgage, start by checking your credit score and comparing rates from at least three lenders. Consider factors like interest rates, fees, and loan terms to help make your decision.

Why Do Mortgage Rates Change Daily?

Mortgage rates can change multiple times a day, sometimes even hourly. These changes can affect the interest rate you pay on your home loan. Several factors can influence these rate moves:

• Federal Reserve’s monetary policies: Mortgage rates tend to move in the same direction as the federal funds rate. The Federal Reserve can also influence rates by buying and selling mortgage-backed securities. 
• Economic trends: Generally, mortgage rates rise when the economy is strengthening and fall when the economy is weakening.
• Supply and demand: Lenders may raise rates when demand is high and lower them when business is light. 
• Inflation: Mortgage rates tend to move in tandem with inflation.
• 10-year U.S. Treasury bond yields: Mortgage rates often move in the same direction of these benchmark bond market yields.

Mortgage Trends Over Time

Vault’s Viewpoint: Mortgage Rate Trends for 2024

After an aggressive cycle of interest rate hikes by the Federal Reserve from March 2022 through July 2023, mortgage rates have cooled a bit. Homebuyers in 2024 have seen rates range from 6.62% in the first week of 2024 to a high of 7.22% in May, settling at 6.99% at the start of June.  

The Economic and Housing Research Group predicts economic growth to slow in 2024 and 2025 but does not expect a recession. The group also forecasts one rate hike from the Federal Reserve later in the year. “As a result, we expect mortgage rates to remain elevated through most of 2024,” says Freddie Mac Chief Economist Sam Khater. “[W]e anticipate housing demand to remain high due to favorable demographics, particularly in the starter home segment.”

But rates are unlikely to return to their 2020 and 2021 lows of around 3% to 3.5%, a mark even the most optimistic economist doesn’t foresee hitting in 2024.

It’s worth noting, the Fed doesn’t set mortgage rates, and the federal funds rate doesn’t directly impact rates. Rather, mortgage rate trends often precede policy moves by the central bank. More accurately, mortgage rates reflect investor demand for mortgage-backed securities (MBS). These investments, in turn, are influenced by what investors think the Federal Reserve’s rate decisions will do to the overall economy.

Vault Expert Tip

What Are the Different Types of Mortgage Loans?

Most homeowners finance their homes with a home loan. Fortunately, you have several mortgage options to choose from, including the following:

1. Conventional loans: Conventional mortgages are the most common type of home loan. Unlike FHA and VA loans, they aren’t guaranteed or insured by a government agency. As such, they don’t come with benefits such as reduced payments and more lenient credit requirements. You may qualify for a conventional loan with a down payment as low as 3%, but most lenders require 5%. You can avoid paying private mortgage insurance with a down payment of at least 20%.
2. FHA loan: An FHA loan is a mortgage insured by the Federal Housing Administration, but you must apply through an FHA-approved lender. FHA loans have more lenient lending criteria, allowing for lower credit scores and down payments as low as 3.5%. The government insures these loans to mitigate the lender’s risk, and you usually must pay mortgage insurance for the loan term (or 11 years with a down payment of 10% or more on FHA loans originated after June 3, 2013).
3. Jumbo loan: A jumbo mortgage is a home loan that exceeds the borrowing limits of a conventional conforming loan. The 2024 baseline limit set by the Federal Housing Finance Agency (FHFA) ranges from $766,550 to $1,149,825, depending on the property’s location. Due to the large size of these loans, lenders generally have stricter lending requirements, including higher credit scores, larger down payments and higher interest rates.
4. VA loan: VA loans are Department of Veterans Affairs mortgages designed to help service members, veterans and their families purchase homes. The VA accomplishes this by allowing 0% down payments, lower interest rates and less expensive closing costs, among other features. Like FHA loans, you must apply through an authorized lender, and the VA insures the loan.
5. USDA loan: USDA loans are issued through the U.S. Department of Agriculture to make homeownership more accessible for rural, low-income residents. Like VA loans, these mortgages don’t require a down payment and come with lower mortgage rates and insurance.

30-Year Mortgage Rates: Lock in Stability With a Long-Term Promise

The benchmark 30-year fixed mortgage now stands at 6.93% after rising 20 basis points since last week. The current rates mark a sizable increase since hitting 7.80% in early October 2023, according to Bankrate data.

The Fed’s recent forecast of 2024 rate cuts could give homebuyers hope for more affordable homes as the market continues to thaw.

Pros

• Predictable rates that don’t change
• Lower payments stretched out over a longer period
• Higher loan amounts available

Cons

• Higher interest rates than shorter-term loans
• More total interest owed over the loan term
• Longer time horizon to gain home equity

15-Year Mortgage Rates: Lower Rates, Higher Payments

Currently, the average rate on 15-year fixed mortgages is 6.21%, after a rise of 17 basis points compared to the previous week.

Pros

• Lower interest rates available
• Reduced total interest charges over loan term
• Home equity builds faster
• Easier to refinance

Cons

• Higher monthly payments
• Harder to qualify due to larger payment
• Could raise debt-to-income ratio (DTI) and hamper ability to qualify for other loans

30-Year Fixed FHA Mortgage Rates: Government-Backed With More Lenient Requirements

Federal Housing Administration (FHA) mortgages are backed by the federal government and insured by the FHA. According to Bankrate’s latest survey of U.S. mortgage lenders, the average 30-year fixed FHA mortgage rate is 7.06%. This figure is an average, so you may find lower APRs by shopping and comparing reputable FHA mortgage lenders.

Pros

• Minimum credit score requirements are as low as 500
• Down payment can be as low as 3.5% with a minimum 580 credit score
• Closing costs can be rolled into mortgage loan

Cons

• Requires mortgage insurance
• Must be used to purchase your primary residence
• Borrowing limits set at $498,257 in most areas but over $1 million in high-cost regions

5/1 ARM Mortgage Rates: Potentially Lower Short-Term Rates and Unpredictable Long-Term Rates

The most common adjustable-rate mortgage (ARM) is the 5/1 ARM. The “5” refers to the initial five-year period when the interest rate doesn’t change. Following this period, the “1” indicates how often your interest rate will adjust—in this case, once every year.

ARMs tend to have lower interest rates than conventional loans, but not always. As of February 12, 2024, rates for 5/1 ARMs are averaging 7.27% nationwide, according to Bankrate’s latest mortgage servicer survey data. That’s a bit higher than the average rate for 30-year fixed-rate mortgages.

Pros

• Lower initial payments
• Mortgage rates may drop, especially if the benchmark interest rate drops
• Flexible option for short-term borrowers who may sell before the adjustment period begins

Cons

• Mortgage rate and monthly payment can rise significantly over time
• Typically requires a larger down payment than other mortgage types
• Long-term budgeting and planning can be more difficult

Frequently Asked Questions

What’s the Difference Between Interest Rate and APR?

Interest rates and annual percentage rates (APR) are related but have different meanings. A loan’s interest rate represents the cost of borrowing money, represented as a percentage of the loan principal. By contrast, the APR provides a more complete picture of your total borrowing costs, as it includes both the interest rate and any additional fees.

Are Mortgage Rates Dropping?

Mortgage rates are determined by a combination of market forces and the loan’s risk factor. For the former, there’s not much you can do about economic factors like inflation, job growth and the overall economy.

As for the latter, lenders set your mortgage rate based on several factors you can control. For example, you may qualify for a lower credit score with a high credit score; the higher, the better. Additionally, by putting down a larger down payment, you can lower your loan-to-value ratio (LTV)—the percentage of your mortgage amount compared with the home’s price or value. A lower LTV presents less risk to the lender, which could lead to a lower mortgage rate.

When Will Mortgage Rates Go Up?

Mortgage rates escalated in 2022 and 2023 during the Federal Reserve’s aggressive rate hike cycle to curb inflation. With inflation cooling, the Fed has hinted at rate cuts in 2024. While the Fed doesn’t set home loan rates, the mortgage finance market does tend to fluctuate with the Fed’s benchmark rate.

Methodology

Bankrate displays two sets of rate averages that are produced from two surveys conducted by Bankrate: one daily (“overnight averages”) and the other weekly (“Bankrate Monitor averages”).

The rates on this page represent Bankrate’s overnight averages. For these averages, APRs and rates are based on no existing relationship or automatic payments.

Newsweek writer Kim Porter contributed to this post.