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.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free 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
-
I have a secret second family. Can my estate cover everyone confidentially?We asked estate planning experts how to keep this skeleton in the closet.
-
Social Security: Are You and Your Financial Adviser in Sync?Deciding when to claim Social Security is tricky if you and your adviser haven't thoroughly covered the topic. Here's how to ensure you're on the right track.
-
How to Find the Best International Moving CompanyIt's best to use an international moving company to protect your belongings and budget when relocating to another country. Here's how to find a reputable firm.
-
How to Find the Best International Moving Company for Your Big Move Abroad (and Avoid Costly Mistakes)
It's best to use an international moving company to protect your belongings and budget when relocating to another country. Here's how to find a reputable firm.
-
How Prices Have Changed in Trump's First YearTrump campaigned on bringing prices down for Americans. Here's where prices stand one year into his second term.
-
Beyond the Bar: Your 5-Step Guide to Discovering Whether a Lawyer Is ShadyResearch shows you can't rely on some state bar websites to vet a lawyer you're considering hiring. Here's how to check out a lawyer before you hire.
-
6 Practical Steps to Help Keep Your Student Focused on College Rather Than the Financial StrainToo many students drop out due to financial strain. This plan can help families plan for the costs and get timely aid that sees students through to graduation.
-
How to Plan a (Successful) Family ReunionFrom shaping the guest list to building the budget, here's how to design a successful and memorable family reunion.
-
What to Ask a Contractor Before a RenovationHomeowners should ask these essential questions before hiring a contractor to avoid surprises, protect their investment and keep projects on time and on budget.
-
Does Your Car Insurer Need to Know All Your Kids? Michigan Cases Raise QuestionWho you list on your policy matters more than most drivers realize, especially when it comes to who lives in your home.
-
Is Direct Primary Care Right for Your Health Needs?With the direct primary care model, you pay a membership fee for more personalized medical services.
