Current Mortgage Rates

There's good news for homebuyers this week: Slowly but surely, mortgage rates are falling.

The 30-year fixed-rate loan averaged 6.67% for the week ending December 21, a decrease of 0.28 percentage points from a week ago, according to Freddie Mac's benchmark survey. That's the lowest the 30-year rate has dropped since June.

Rates have been trending down over the last eight weeks, a shift that's "bringing potential homebuyers who were previously waiting on the sidelines back into the market," said Sam Khater, Freddie Mac's chief economist, in a press release.

The 15-year fixed-rate mortgage averaged 5.95%; down by nearly half a percentage point over the past seven days. This is the first time the 15-year rate has fallen below 6% since late May.

If you're offered a higher rate than expected, make sure to ask why and compare offers from multiple lenders. (Money's list of the Best Mortgage Lenders is a good place to start. Homeowners considering a mortgage refinance should consider our list of the Best Mortgage Refinance Companies.)

Use Money's mortgage calculator to get an estimate of your monthly payment, taking different rate scenarios into consideration.

• How are mortgage rates impacting home sales?
• What credit score do mortgage lenders use?
• What is a good interest rate on a mortgage?
• How are mortgage rates determined?
• How to get the best mortgage rate
• Difference between APR and interest rate

What's been happening in the housing market

Here's what's happening in the housing market this week:

• Home prices have eased off their breakneck pace in recent months, but homeowners are still in pretty good shape in terms of gained value. According to a recent report by data analyticis firm CoreLogic, homeowners nationwide gained $1.1 million in equity during the third quarter this year. Owners in Hawaii, California and Massachusetts were the big winners, with gains of over $40,000.
• If your New Year's resolution revolves around leading a healthier life, your odds are better if you live in one of the 10 states most likely to become "Blue Zones." The concept behind the colorful designation, recently highlighted in a buzzy Netflix documentary, showcases the parts of the world where residents have fewer medical ailments and longer life spans compared to other countries. New research from the online pharmacy NowPatient takes the concept stateside; grading U.S. states on the longevity of the people who live there.

• There's good news on the inventory front: According to the U.S. Census Bureau, the November number of housing starts, or construction that began on new homes, jumped by almost 15% compared to October, and rose more than 9% year-over-year. Many of these homes will be finished in 2024, adding much-needed supply to the market.

Mortgage interest rates for the week ending December 21, 2023

Mortgage rate trends

Rates decreased this week:

• The current rate for a 30-year fixed-rate mortgage is 6.67%, a week-over-week decrease of 0.28 percentage points. Last year, the 30-year rate averaged 6.27%.
• The current rate for a 15-year fixed-rate mortgage is 5.95%, down by 0.43 percentage points compared to a week ago. A year ago, the 15-year rate averaged 5.69%.

For its weekly rate analysis, Freddie Mac looks at rates offered for the week ending each Thursday. The average rate represents roughly the rate a borrower with strong credit and a 20% down payment can expect to see when applying for a mortgage right now. Borrowers with lower credit scores will generally be offered higher rates.

Money's average mortgage rates for December 26, 2023

Mortgage rates edged higher across all loan categories on Friday. The 30-year fixed-rate loan, the most popular in America, averaged 7.694% — an increase of 0.058 percentage points.

• The latest rate on a 30-year fixed-rate mortgage is 7.694% ⇑ 0.058%
• The latest rate on a 15-year fixed-rate mortgage is 6.333% ⇑ 0.002%
• The latest rate on a 5/6 ARM is 7.678%. ⇑ 0.018%
• The latest rate on a 7/6 ARM is 7.866%. ⇑ 0.035%
• The latest rate on a 10/6 ARM is 7.618% ⇑ 0.08%

Money's daily mortgage rates are a national average and reflect what a borrower with a 20% down payment, no points paid and a 700 credit score — roughly the national average score — might pay if they applied for a home loan right now. Each day's rates are based on the average rate 8,000 lenders offered to applicants the previous business day. Your individual rate will vary depending on your location, lender and financial details.

These rates are different from Freddie Mac’s rates, which represent a weekly average based on a survey of quoted rates offered to borrowers with strong credit, a 20% down payment and discounts for points paid.

Today’s mortgage rates and your monthly payment

The rate on your mortgage can make a big difference in how much home you can afford and the size of your monthly payments.

If you bought a $250,000 home and made a 20% down payment — of $50,000 — you would end up with a starting loan balance of $200,000. On a $200,000 home loan with a fixed rate for 30 years, here's what you would pay:

• At a 3% interest rate = $843 in monthly payments (not including taxes, insurance, or HOA fees)
• At a 4% interest rate = $955 in monthly payments (not including taxes, insurance, or HOA fees)
• At a 6% interest rate = $1,199 in monthly payments (not including taxes, insurance, or HOA fees)
• At an 8% interest rate = $1,468 in monthly payments (not including taxes, insurance, or HOA fees)

You can experiment with a mortgage calculator to find out how much a lower rate or other changes could impact what you pay. A home affordability calculator can also give you an estimate of the maximum loan amount you may qualify for based on your income, debt-to-income ratio, mortgage interest rate and other variables. The Consumer Financial Protection Bureau can also provide a range of rates being offered by lenders in each state.

Other factors determine how much you'll pay each month, which are detailed in the loan disclosures provided by your lender. These factors include:

Loan Term:

Choosing a 15-year mortgage instead of a 30-year mortgage will increase monthly mortgage payments but reduce the amount of interest paid throughout the life of the loan.

Fixed vs. ARM:

With a fixed-rate loan, payments remain the same throughout the life of the loan. The mortgage rates on adjustable-rate mortgages reset regularly (after an introductory period) and monthly payments change with it.

Taxes, HOA Fees, Insurance:

Homeowners' insurance premiums, property taxes and homeowners association fees are often bundled into your monthly mortgage payment. Check with your real estate agent to get an estimate of these costs.

Mortgage Insurance:

Mortgage insurance can cost up to 1% of your home loan's value per year. Borrowers with conventional loans can avoid private mortgage insurance by making a down payment of at least 20% or reaching 20% of the home's equity. FHA borrowers pay a mortgage insurance premium throughout the life of the loan.

Closing Costs:

Some buyers finance their new home's closing costs into the loan, which adds to the debt and increases monthly payments. Closing costs generally run between 2% and 5% of the value of the mortgage.

Current Mortgage Rates Guide

Mortgage rates are an important part of the homeownership puzzle. Our guide answers some of the most common questions surrounding mortgage rates and how they affect the housing market.

How are mortgage rates impacting home sales?

Following a five-month slowdown, home sales crept up in November as mortgage rates started to slide.

Existing home sales — a measure of recently-closed contracts for single-family residences, condos, townhomes and co-ops — increased by 0.8% compared to the previous month, according to the National Association of Realtors. Still, compared to a year ago, sales were down by more than 7%.

The number of homes available for sale stood at 1.13 million units, which is about a 3.5-month supply at the current pace of sales; still well below the "normal" 6-month supply housing experts consider representative of a healthy market.

What credit score do mortgage lenders use?

Most mortgage lenders use your FICO score — a credit score created by the Fair Isaac Corporation — to determine your loan eligibility.

Lenders typically request a merged credit report that combines information from all three of the major credit reporting bureaus — Experian, Transunion and Equifax. This report will also contain your FICO score as reported by each credit agency.

Each of the three credit bureaus is likely to have a different FICO score, and your lender will typically use the middle score when evaluating your creditworthiness. If you are applying for a mortgage with a partner, the lender could base their decision on the average credit score of both borrowers.

Lenders may also use a more thorough residential mortgage credit report that includes more detailed information than that in your standard reports, such as employment history and current salary.

What is a good interest rate on a mortgage?

A good mortgage rate is one that allows you to comfortably afford the monthly payments, and where the other details of the loan also fit your needs. Consider details such as the loan type (i.e. whether the rate is fixed or adjustable), length of the loan, origination and lender fees and other costs. Note that refinance rates tend to be higher than purchase rates for a primary residence.

Keep in mind that today's mortgage rates remain fairly high, historically speaking. Freddie Mac's average rates show what a borrower with a 20% down payment and a strong credit score might be able to get if they were to speak to a lender this week.

If you are making a smaller down payment, have a lower credit score or are taking out a non-conforming (or jumbo loan) mortgage, you may see an even higher rate. It’s also worth noting that jumbo loans have a higher down payment requirement than conventional loans. Money’s daily mortgage rate data shows borrowers with 700 credit scores are finding rates averaging above 8% right now.

How are mortgage rates determined?

Lenders use several factors to set rates each day. Every lender's formula will be a little different but will factor in the current federal funds rate (a short-term rate set by the Federal Reserve), competitors' rates and even how many staff they have available to underwrite loans. Your qualifications will also impact the rate you are offered, naturally.

In general, rates track the yields on the 10-year Treasury note. Average mortgage rates are usually about 1.8 percentage points higher than the yield on the 10-year note.

Yields matter because lenders don't keep the mortgage they originate on their books for long. Instead, to free up money to keep originating more loans, lenders sell their mortgages to entities like Freddie Mac and Fannie Mae. These mortgages are then packaged into what are called mortgage-backed securities, which are sold to investors. Investors will only buy these securities if they can earn a bit more than they can on the government notes.

Your qualifications will also impact the rate you are offered, as will the loan-to-value ratio (LTV). The LTV of your property is one way lenders assess the amount of risk posed by approving a loan and is calculated by dividing the maximum loan amount you qualify for by the appraised home value.

How to get the best mortgage rate

Shopping around for the best mortgage rate can mean a lower rate and big savings. On average, borrowers who get a rate quote from one additional lender save $600 over the life of the loan, according to Freddie Mac. Those savings go up to $1,200 if you get three quotes. A larger down payment amount will also result in a lower interest rate.

The best mortgage lender for you will be the one that can give you the lowest rate and the terms you want. Your local bank or credit union is one place to look. Online lenders have expanded their market share over the past decade and promise to get you pre-approved within minutes.

Shop around to compare loan options, rates and terms, and make sure your lender has the type of mortgage you need. Not all lenders write FHA loans, USDA-backed mortgages or VA loans, for example. If you're not sure about a lender's credentials, ask for its NMLS number and search for online reviews.

What's the difference between interest rate and APR on a mortgage?

Borrowers often mix up interest rates and annual percentage rates (APR). That’s understandable since both rates refer to how much you’ll pay for the loan. While similar, the terms are not synonymous.

An interest rate is what a lender will charge on the principal amount being borrowed. Think of it as the basic cost of borrowing money for a home purchase.

An APR represents the total cost of borrowing money and includes the interest rate plus any fees, associated with generating the loan. The APR will always be higher than the interest rate.

For example, a $300,000 loan with a 3.1% interest rate and $2,100 in fees would have an APR of 3.169%.

When comparing rates from different lenders, look at both the APR and the interest rate. The APR will represent the true cost over the full term of the loan, but you’ll also need to consider what you’re able to pay upfront versus over time.

Summary of current mortgage rates

Mortgage rate trends

Rates decreased this week:

• The current rate for a 30-year fixed-rate mortgage is 6.67%, a week-over-week decrease of 0.28 percentage points. Last year, the 30-year rate averaged 6.27%.
• The current rate for a 15-year fixed-rate mortgage is 5.95%, down by 0.43 percentage points compared to a week ago. A year ago, the 15-year rate averaged 5.69%.