Unlock Today’s Mortgage Rates: December 25, 2024 Insights Revealed!

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• Mortgage rates for December 25, 2024, are currently in the high 6% range.
• Rates saw an uptick last week due to expectations of fewer Federal Reserve cuts in the year ahead.
• Unless inflation takes a nosedive, mortgage rates might not decrease as significantly as initially anticipated next year.

Recently, mortgage rates took a leap following the Federal Reserve’s latest economic projections. Initially, there was talk of four cuts to the federal funds rate in 2025, but now the expectation is down to just two.

Mortgage rates are intricately woven with investor sentiment regarding future Fed actions; hence, the news of fewer cuts has nudged rates higher.

While mortgage rates are predicted to decline next year, the extent of this drop hinges heavily on inflation trends and the Fed’s ability to maintain a lowering stance. If inflation remains stubbornly high or increases, rates may not fall much at all.

Today’s Mortgage Rates

Today’s Refinance Rates

Mortgage Calculator

Try out our free mortgage calculator to find out how today’s interest rates may influence your monthly payments:

Click on “More details” to see a breakdown of how much you’ll pay over the life of your mortgage, including how much is allocated towards principal versus interest.

30-Year Mortgage Rates

The average 30-year mortgage rates are sitting in the upper 6% range, according to the latest data. In November, the average was around 6.56%.

The 30-year fixed-rate mortgage remains the most sought-after type of loan. With this plan, you’ll pay off what you owe over 30 years, with your interest rate locked in for the full term.

This extended timeline allows for lower monthly payments, making homeownership more accessible. However, it does come with a trade-off: you’re likely to pay a higher rate compared to shorter options like a 15-year mortgage.

15-Year Mortgage Rates

When it comes to 15-year mortgage rates, averages hover around 6%. In November, they were recorded at 5.92%.

If you seek stability with a fixed rate while wanting to pay less in interest over the life of the loan, a 15-year fixed-rate mortgage could be your best bet. These loans typically come with shorter terms and lower rates than their 30-year counterparts, potentially saving you thousands in interest costs over time. Be prepared for a higher monthly payment, however.

ARM Rates

Currently, rates for adjustable-rate mortgages (ARMs) are comparable to fixed rates. In November, the average mortgage rate for a 7/1 ARM was 6.82%, while a 5/1 ARM averaged 6.83%.

With an ARM, you’ll enjoy a fixed rate for an initial period, after which your rate will adjust periodically. For example, with a 7/1 ARM, your rate remains fixed for seven years before it starts adjusting annually.

ARM rates can often be lower than fixed rates, which is attractive for homeowners looking to minimize monthly payments. However, keep in mind that your payment could rise when the rate begins to adjust.

FHA Interest Rates

As for FHA interest rates, they stood at 5.41% in November but have remained around 5.60% this month.

FHA loans, backed by the Federal Housing Administration, allow lenders to work with borrowers who may have lower credit scores and smaller down payments, making them an appealing option for first-time buyers and those with limited income. These loans typically offer lower rates compared to standard mortgages.

To qualify for an FHA loan, you’ll need a credit score of at least 580 and a down payment of 3.5%. If you can muster a down payment of 10%, you might qualify with a score as low as 500, although not all lenders provide this option.

VA Mortgage Rates

The latest VA mortgage rates hover around 6%, with averages sitting at 5.97% last month.

VA loans cater to veterans and military personnel who meet specific service requirements. Backed by the Department of Veterans Affairs, these loans require no down payment or mortgage insurance.

Mortgage Refinance Rates

Refinance rates have mirrored purchase rates recently. Last month, 30-year refinance rates averaged 6.62%, while 15-year refinance rates were around 5.96%.

How Much Do Mortgage Rates Need to Drop to Refinance?

Considering refinancing? It’s all about the numbers. Some experts suggest refinancing only if you can lower your rate by at least a percentage point, but the best approach is to assess your unique situation.

If refinancing can save you enough each month to cover the costs within a reasonable time frame, it could be worth it. To gauge this, divide your closing costs by your potential monthly savings. For example, if you spent $3,000 to refinance and saved $200 monthly, your break-even point would be 15 months.

5-Year Mortgage Rate Trends

Here’s a snapshot of how 30-year and 15-year mortgage rates have evolved over the last five years:

What Factors Influence Mortgage Rates?

The landscape of mortgage rates is influenced by several factors, such as broader economic shifts, Federal Reserve policies, your state’s current mortgage rates, the type of loan, and your personal financial profile.

Many of these elements lie outside your control; however, you can take steps to boost your credit score, reduce debt, and save for a larger down payment to secure the best rates possible.

How Does the Fed Rate Affect Mortgage Rates?

The Federal Reserve significantly raised the federal funds rate in 2022 and 2023 to curb economic growth and control inflation. Though inflation has eased, it still hovers above the Fed’s target of 2%.

While mortgage rates aren’t directly impacted by the federal funds rate changes, they often react in anticipation of Fed policy shifts. This is largely due to the demand for mortgage-backed securities, which is influenced by how investors perceive Fed actions’ impact on the economy.

The Fed has begun to lower rates, yet mortgage rates remain higher due to uncertainty surrounding future inflation trends.

Mortgage Rate Projection for 2025

While mortgage rates are forecasted to decline in 2025, they are likely to remain above historical norms for a while longer.

Mortgage rates began to rise from historic lows in late 2021, climbing significantly through 2022 and into 2023. However, with inflation now slowing and the Fed cutting rates, we anticipate some easing of mortgage rates. Over the last year, the consumer price index rose by 2.7%, a stark contrast to the peak of 9.1% in 2022.

The extent to which rates drop will depend on the trajectory of the economy. If conditions stabilize, reductions may be modest. However, if the labor market weakens and the Fed needs to act more aggressively, we could see more pronounced drops.

While rates are not expected to return to the historic lows seen in 2020 and 2021—when the 30-year fixed rates dipped below 3%—we could see them settle closer to 6% in the coming years.

When Will House Prices Come Down?

Don’t hold your breath for home prices to drop anytime soon. In fact, they are likely to rise. The current inventory of homes is at a historical low, which is pushing prices upward.

Fannie Mae researchers anticipate prices will climb by 3.6% in 2025, while the Mortgage Bankers Association predicts a more modest increase of 1.5%.

How Much Mortgage Can I Afford?

Utilize a mortgage calculator like the one above to determine how much house you can afford. Experiment with different home prices and down payment scenarios to see how they affect your monthly payment and fit within your overall budget.

Experts typically recommend that housing expenses should not exceed 28% of your gross monthly income. This means your total monthly mortgage payment, encompassing taxes and insurance, should stay below this threshold. However, it’s essential to evaluate your entire financial picture to ensure a mortgage payment doesn’t strain your budget.

The lower your interest rate, the more you can borrow, so it’s crucial to shop around and get preapproved with multiple lenders to secure the best deal. Just remember to borrow within your means to avoid financial stress.