After hovering in the high 6% and 7% range for much of 2023 and 2024, mortgage rates are finally starting to drop. Steadily declining over the last several weeks, rates are now sitting at the lowest level they’ve been since February 2023. And because refinancing your mortgage rate to be just 1% lower can significantly reduce your monthly payment, this drop in rates has led to a surge in refinance applications. But other homeowners are looking to save even more by waiting for rates to fall further.
As of September 19, 2024, 30-year fixed-rate mortgages averaged 6.09%, down from 6.20% the week prior, according to Freddie Mac. A year ago at this time, rates averaged 7.19%. This big drop in rates was preceded by the Fed’s first interest rate cut in four years. And while the Federal Reserve does not directly control mortgage rates, its actions do influence rates indirectly.
That’s because mortgage rates are influenced not only by the Fed’s actions but by the 10-year Treasury yield, inflation, job growth and a shrinking or growing economy. However, variable-rate mortgages and adjustable-rate mortgages typically see rates decline after a Fed interest rate cut.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Here’s a closer look at how much you could save depending on how much your mortgage rate falls.
Here's how much you could save as mortgage rates fall
The following shows how much you’d be able to save by opting for a lower 30-year mortgage rate, based on a home with a sale price of $350,000 with a 20% down payment.
Loan 1:
- Interest rate: 6.09%
- Monthly payment: $2,266
- Total interest: $330,584
- Total amount to be paid: $610,584
Loan 2:
- Interest rate: 5.84%
- Monthly payment: 2,221
- Total interest: $314,276
- Total amount to be paid: $594,276
Loan 3:
- Interest rate: 5.59%
- Monthly payment: $2,176
- Total interest: $298,163
- Total amount to be paid: $578,163
Loan 4:
- Interest rate: 5.09%
- Monthly payment: $2,088
- Total interest: $266,548
- Total amount paid: $546,548
Loan 5:
- Interest rate: 4.59%
- Monthly payment: $2,003
- Total interest: $235,781
- Total amount paid: $515,781
Another thing to consider when looking for the lowest mortgage rate available is your credit score. Boosting your credit score could save you hundreds, or even thousands, of dollars on your home mortgage. For example, according to MyFICO, if you had a loan with a principal amount of 350,000, you could save an extra $1,996 by boosting your score from a range of 620-639 to a range of 760-850.
Bottom line
Many experts believe that the magic number to bring sidelined buyers into the housing market is 6%. And rates are almost there. However, a significant surge in buyers could cause home prices to skyrocket, so that’s one factor to consider when holding out for lower rates.
Related Content
-
Cord Cutting Could Help You Save Over $10,000 in 10 YearsHow cutting the cord can save you money and how those savings can grow over time.
-
The '8-Year Rule of Social Security' — A Retirement RuleThe '8-Year Rule of Social Security' holds that it's best to be like Ike — Eisenhower, that is. The five-star General knew a thing or two about good timing.
-
Cord Cutting Could Help You Save Over $10,000 in 10 Years
How cutting the cord can save you money and how those savings can grow over time.
-
Tips for Expat Retirees, From Expat RetireesYou may enjoy a lower cost of living by moving abroad, but it requires careful planning.
-
The Top Fourth of July Fireworks and Celebrations Across AmericaFrom Boston to San Diego, these iconic celebrations light up the sky — and the spirit of Independence Day.
-
Why Retirees Need a Budget, According to a New RetireeA new retiree explains why retirees need a budget.
-
My First $1 Million: Air Force Veteran, 68, Duluth, Ga.Ever wonder how someone who's made a million dollars or more did it? Kiplinger's My First $1 Million series uncovers the answers.
-
Your Home + Your IRA = Your Long-Term Care SolutionIf you're worried that long-term care costs will drain your retirement savings, consider a personalized retirement plan that could solve your problem.
-
How to Choose a Mortgage Lender in Five StepsNot all lenders are created equal — here’s how to compare offers, rates and terms with confidence.
-
A Meteorite May Have Hit a Home in Georgia. Would Insurance Cover the Damage?In a rare event, a meteorite may have crashed through the roof of a Georgia homeowner. Here’s what home insurance would cover.
