In 2024, the housing market saw fluctuations in mortgage rates due to factors such as strong economic data and concerns over President-elect Donald Trump’s policies. Despite hopes for lower rates, the average 30-year fixed mortgage rate was 6.79%, with a slight decrease over the previous week. The Fed is expected to make a 0.25% interest rate cut in December, potentially the last for a while. The pace of rate cuts in 2025 may slow, keeping upward pressure on mortgage rates.
Mortgage rates are influenced by various economic indicators, not directly set by the Fed. Rates had plunged earlier in the year due to expectations of aggressive rate cuts, but began to rise after the Fed’s September policy meeting. The election of Donald Trump and his proposed economic policies also contributed to the increase in rates. The average rate for a 15-year fixed mortgage was 6.11% on December 17, 2024. The Fed’s upcoming rate cut may not result in an immediate decline in mortgage rates, and further cuts may be delayed in 2025.
Today’s homebuyers are facing challenges in affording homes due to high mortgage rates, low wage growth, and limited housing inventory. The direction of mortgage rates in the future will depend on economic performance, with strong data leading to higher rates and weaker data potentially causing rates to fall. Various economic outcomes could affect mortgage rates, with the potential for rates to dip into the 5% range if inflation trends lower and the labor market weakens, or rise above 7% if inflation heats up due to Trump’s policies.
Different mortgage terms, such as 15 and 30 years, offer stability with fixed rates or lower initial rates with adjustable rates. The 30-year fixed mortgage rate average was 6.79% on December 17, 2024, while the average rate for a 15-year fixed mortgage was 6.11%. Homebuyers can calculate their monthly mortgage payments using online tools and choose a term that aligns with their financial goals. Saving for a bigger down payment, improving credit scores, paying off debt, researching loan options, and comparing lenders can help secure the lowest mortgage rates.
Despite the current high mortgage rates, it is advisable to plan ahead and save for a down payment while working on improving credit scores to secure a competitive rate in the future. Making a budget, staying within one’s means, and researching loan options can help homebuyers prepare for monthly mortgage payments. Government-sponsored loans and programs can also provide assistance with down payments and closing costs. Shopping around for lenders and comparing offers can help homebuyers find the best mortgage rate for their situation.
