irina88w/GettyImages; Illustration by Hunter Newton/Bankrate
The Federal Reserve cut interest rates again in October, and mortgage rates fell to their lowest levels in more than a year. While the Fed doesn’t directly control mortgage rates, it does set the overall tone. The central bank has cut its benchmark rate twice this year so far; it next meets in December.
Mortgage rates are in a holding pattern for the foreseeable future.
— Stephen Kates
Financial Analyst, Bankrate
As of Oct. 29, the average 30-year mortgage rate was 6.25 percent, according to Bankrate’s weekly lender survey.
“Mortgage rates are in a holding pattern for the foreseeable future,” says Stephen Kates, financial analyst for Bankrate. “For borrowers who want to strike, we’re likely to see rates bounce within a quarter-point range through the end of the year. The message from the Federal Reserve that a December rate cut is not a sure thing sent rates slightly higher following the October meeting, and that is where they are likely to stay until we get more meaningful data on the economy after the government shutdown ends.”
“While the Fed did lower rates by 0.25 percent, its tone during the press conference was cautious about a rate cut in December, which caused bond yields to move up and nudged mortgage rates higher,” said Samir Dedhia, CEO of One Real Mortgage.
Learn more: How the Fed affects mortgage rates
Will mortgage interest rates go down again?
The possibility of sub-6 percent mortgage rates has grown somewhat stronger. Fannie Mae predicts rates will edge down to 6.3 percent by the end of the year, while the Mortgage Bankers Association expects 30-year rates will barely decrease, to 6.4 percent by the end of 2025.
Learn more: Housing market trends to watch in 2025
Current mortgage rate trends
Higher mortgage rates have kept homeowners clinging to lower-cost loans, a trend known as the lock-in effect. Meanwhile, the median national home price clocked in at $415,200 in September, a record high for the month, according to the National Association of Realtors.
Bankrate’s weekly mortgage rate averages differ slightly from the statistics reported by Freddie Mac, the government-sponsored enterprise that buys mortgages and packages them as securities. Bankrate’s rates tend to be higher because they include origination points and other costs, while Freddie Mac removes those figures and reports them separately. However, both Bankrate and Freddie Mac report similar overall trends in mortgage rates.
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What to do if you’re getting a mortgage this year
- Improve your credit score. A lower credit score won’t prevent you from getting a loan, but it can make all the difference between getting the lowest possible rate and more costly borrowing terms. The best mortgage rates go to borrowers with the highest credit scores, usually at least 780.
- Save up for a bigger down payment. Putting more money down upfront can help you obtain a lower mortgage rate, and if you put down at least 20 percent of the purchase price, you’ll avoid mortgage insurance, which adds costs to your loan. If you’re a first-time homebuyer and can’t cover a 20 percent down payment, there are loans, grants and programs that can help. The eligibility requirements vary by program but are often based on factors like your income.
- Understand your debt-to-income ratio. Your DTI ratio compares how much money you owe to how much money you make, specifically your total monthly debt payments against your gross monthly income. Not sure how to figure out your DTI ratio? Bankrate has a calculator for that.
FAQs
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Mortgage rates are not directly set by any one entity; they grow from a complicated mix of economic factors. Lenders typically set their rates based on the return they need to make a profit after accounting for risks and costs. The Federal Reserve gets a lot of attention, but it doesn’t directly set mortgage rates, either. The closest proxy for mortgage rates is the 10-year Treasury yield: Historically, the typical 30-year mortgage rate has been about 2 percentage points higher than the 10-year Treasury yield. But since the pandemic, that “spread” has been closer to 3 percentage points.
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Deciding when to refinance is based on many factors. If rates have fallen since you took out your mortgage, refinancing might make sense. A refi can also be a good idea if you’ve improved your credit score and could lock in a lower rate. A cash-out refinance can accomplish that as well, plus give you the funds to pay for a home renovation or other expenses.
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