30-Year Mortgage Rates Climb to 7.00% After Fed’s Bold Move!

As we wrap up 2024, mortgage rates are making headlines for all the wrong reasons. After a quiet holiday week, we’re witnessing a significant uptick in borrowing costs, bringing the beloved 30-year mortgage benchmark back to levels we haven’t seen since July. The catalyst? A recent Federal Reserve meeting that sent shockwaves through the market with yet another interest rate cut—this time by a quarter point—adding to the overall economic uncertainty fueled by President-elect Trump’s emerging fiscal policies. For many first-time homebuyers and those looking to refinance, the dream of affordable rates seems just out of reach as we head into the new year.

Currently, the average rate for a 30-year fixed mortgage is hovering at 6.99% for purchases and 7.01% for refinances. That’s a jump of 10 basis points from last week’s 6.89% for purchases and 13 basis points from 6.88% for refinances. If you’re considering a 15-year mortgage, expect to see an average rate of 6.35% for both purchases and refinances, up 20 and 19 basis points respectively from last Friday. Don’t forget, jumbo loans are also feeling the squeeze, with an average rate of 7.00%!

⭐️ Don’t miss out: 6 tips to snag the lowest mortgage rate today!

Latest Purchase Rates as of December 27, 2024

Refinance Rates for December 27, 2024

In the ever-changing landscape of mortgage rates, a complex interplay of factors is at work. Inflation trends, economic conditions, and housing market dynamics all play a role in shaping rates. On a personal level, your credit score, down payment, and loan terms significantly influence the rate you’re offered. Remember, with rates fluctuating daily, locking in a good mortgage rate when conditions feel right can save you a fortune in the long run.

The Latest from Freddie Mac: Rates on the Rise

Freddie Mac’s weekly report shows an average of 6.85% for a 30-year fixed-rate mortgage, marking a 13 basis points increase from 6.72% last week. The fixed rate for a 15-year mortgage now sits at 6.0%. Although these rates have risen, they’re still slightly lower than a year ago, when the averages were 6.61% for a 30-year term and 5.93% for a 15-year term.

According to Sam Khater, Freddie Mac’s chief economist, “Mortgage rates have risen for the second consecutive week following a slight decline earlier this month. While the uptick in home sales is a positive sign, challenges remain due to an . A robust economy may help propel homebuying activity as we step into 2025.”

4 Key Factors Influencing Your Mortgage Rate

Did you know that even a slight difference in your mortgage rate can save you a significant sum over time? Here’s what lenders look at to determine your rate:

• Your Credit Score: A solid credit score is crucial. Borrowers with a score of 670 or higher typically snag the best rates. But don’t worry! Even with fair credit, you might still find competitive options.

• Your Down Payment: The larger your down payment, the more favorable your rate. A 20% down payment not only leads to lower interest but also helps you skip mortgage insurance!

• Your Loan Term: While the 30-year mortgage is a favorite, shorter terms like 15 or 10 years can offer lower rates. Keep in mind that shorter terms mean higher monthly payments, but you’ll save on interest overall.

• Type of Interest Rate: You can choose between fixed and variable rates. Fixed rates provide stability, while adjustable-rate mortgages (ARMs) might start lower but can fluctuate. Weigh your options based on your financial goals and risk tolerance.

Prequalification vs. Preapproval: What’s the Difference?

Understanding where you stand in the home-buying journey is crucial. Prequalification gives you a general idea of what you can afford based on basic information. In contrast, preapproval digs deeper into your finances, giving you a more accurate assessment of your borrowing power. Discover the ins and outs of this process in our detailed guide.

Want to Learn More? Find out how much a change in mortgage rates can really impact you!

Mortgage Rates in the News

Mortgage rates don’t operate in a vacuum. They closely follow the Federal Reserve’s target interest rate, which acts as a barometer for loans and savings rates across the board. Although mortgage rates don’t always mirror the Fed rate precisely, they are heavily influenced by the same economic indicators, particularly inflation.

The Federal Reserve has been active lately, raising the target interest rate multiple times in response to the highest inflation levels in decades. However, in a surprising shift, the Fed has begun to implement cuts to this rate—offering a glimmer of hope for prospective homebuyers.

December 18, 2024: Fed Cuts Rates by Another Quarter Point

At their final meeting of the year, the Federal Reserve announced a significant reduction in the federal funds target interest rate, now set at a range of 4.25% to 4.50%. This marks the third consecutive cut within just a few months, reflecting slow shifts in the labor market and persistent inflation challenges.

The Fed will continue to assess economic data moving forward, indicating potential future cuts might be on the horizon, depending on inflation and job growth numbers.

Looking Ahead: Fed’s January Meeting

As we move into 2025, all eyes are on the Federal Reserve’s upcoming policy meeting scheduled for January 28-29. Experts anticipate more cuts to the federal funds rate, but only time will tell how the markets will respond. Inflation and job reports will play a pivotal role in determining the Fed’s next move.

With fresh reports indicating rebound hiring patterns and steady inflation, the economic landscape appears complex yet hopeful as we transition into the new year.

Explore More: Get the scoop on the next Fed meeting and its potential impact on your finances!

NAR Settlement and Realtor Commission Changes

In a landmark case, the National Association of Realtors has agreed to a $418 million antitrust settlement that alters the conventional commission structure for real estate agents. Starting August 17, buyers will now receive a representation agreement before touring properties, promoting transparency in agent fees. While this change won’t directly affect mortgage rates, it empowers consumers to negotiate their agent fees, offering an opportunity for significant savings in the long run.

Frequently Asked Questions About Mortgage Rates

What Are Mortgage Lenders?

Mortgage lenders are the financial institutions that provide loans to homebuyers. Different from loan servicers who manage the operational aspects of your loan, lenders are where the money originates.

What Does It Mean to Refinance a Mortgage?

Refinancing involves replacing your current mortgage with a new one that ideally offers better terms, such as lower interest rates. The new lender pays off your old mortgage, and you start fresh with new monthly payments. Interested in learning how to time your refinancing? Check out our comprehensive guide.

What Is a Mortgage Rate Lock?

A mortgage rate lock secures your interest rate for a specified period—usually between 30 to 60 days—ensuring you won’t be affected by market fluctuations while you finalize your loan. Want to know more about how this can benefit you? Check out our guide to mortgage rate locks.

I’ve Owned a Home in the Past—Can I Still Qualify for Homebuyer Assistance?

Absolutely! If you or your spouse hasn’t owned a primary residence in the last three years, you’re still considered a first-time homebuyer by the IRS and HUD. Dive into the various programs available to you—even if you’re not a first-time buyer—with our guide to homebuyer assistance.

What Is an Adjustable-Rate Mortgage?

An adjustable-rate mortgage (ARM) is a loan with a variable interest rate that starts lower than a fixed-rate mortgage for a set period—usually three years or more—before adjusting to a higher rate. Curious about how ARMs work? A 5/1 ARM means the initial rate is fixed for five years, after which it adjusts annually. Understanding how these loans can fit your strategy is key!

Can I Negotiate My Mortgage Rate?

While direct negotiation on rates is rare, you can ask lenders about ways to lower your overall costs. Many offer lower rates when you pay upfront fees known as “mortgage points.” Each point typically costs about 1% of the loan amount and can reduce your rate by roughly 0.25%. Learn more about this strategy in our guide to securing the best mortgage rate.

What Happens to My Mortgage After I Die?

Your mortgage is treated differently than other debts. Typically, only those who signed on to the loan are responsible for its repayment. The property must be paid off in full to transfer the title, which means only those on the mortgage can be held liable. For more details, read about what happens to a mortgage after death.

I Already Own a Home—Can I Borrow Against My Home’s Equity?

You can indeed! If you’re looking to fund renovations, pay off high-interest debt, or cover unexpected expenses, tapping into your home’s equity can be a smart move. This allows you to unlock lower rates without refinancing your existing mortgage. Qualifying typically requires good credit and sufficient equity in your home. Discover options for accessing your home’s equity in our detailed guide.

Note: Rates are accurate as of Friday, December 27, 2024, at 6:45 a.m. ET. Rates and promotional offers may vary by region and are subject to change.

Sources

• Mortgage Industry Insights. Accessed December 27, 2024.

• Economic, Housing and Mortgage Market Outlook – November 2024. Accessed December 24, 2024.

• Primary Mortgage Market Survey. Accessed December 27, 2024.

• Employment Situation Summary. Accessed December 9, 2024.

• Consumer Price Index Summary. Accessed December 12, 2024.

• Producer Price Index News Release Summary. Accessed December 13, 2024.