Mortgage Interest Rates Today, September 3, 2024 | How Much Will Rates Drop?

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Mortgage rates should keep coming down. But it's still unclear how quickly they'll drop, and where they might ultimately end up.

Last month, 30-year mortgage rates dropped below 6% for the first time since early 2023, according to Zillow data.

Rates fell in response to cooling economic data and expectations that the Federal Reserve will start lowering the federal funds rate later this month. Traders are betting that the central bank could slash rates by 100 basis points by the end of the year, with more cuts expected in 2025 as well.

High mortgage rates have made for a challenging couple of years for homebuyers. But now that rates are dropping back down, more buyers should have an opportunity to get into a home affordably. 

How much rates drop depends on how the economy trends and how quickly the Fed lowers rates. One key area of the economy to watch will be the labor market. If Friday's jobs report shows unexpected weakening, that raises the likelihood that mortgage rates will go down more substantially in the coming months. But if the labor market remains relatively stable, rates may take longer to ease.

Mortgage Rates Today

Mortgage Refinance Rates Today

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Use our free mortgage calculator to see how today's mortgage rates will affect your monthly and long-term payments.

By plugging in different term lengths and interest rates, you'll see how your monthly payment could change.

Mortgage Rate Projection for 2024

Mortgage rates have been elevated for most of 2024, but they've recently started trending down. As the economy continues to normalize this year, rates should come down further.

In the last 12 months, the Consumer Price Index rose by 2.9%, a significant slowdown compared to when it peaked at 9.1% in 2022. As inflation slows and the Federal Reserve is able to start cutting the federal funds rate, mortgage rates are expected to drop.

For homeowners looking to leverage their home's value to cover a big purchase — such as a home renovation — a home equity line of credit (HELOC) may be a good option while we wait for mortgage rates to ease. Check out some of the best HELOC lenders to start your search for the right loan for you.

A HELOC is a line of credit that lets you borrow against the equity in your home. It works similarly to a credit card in that you borrow what you need rather than getting the full amount you're borrowing in a lump sum. It also lets you tap into the money you have in your home without replacing your entire mortgage, like you'd do with a cash-out refinance.

Current HELOC rates are relatively low compared to other loan options, including credit cards and personal loans. 

When Will House Prices Come Down?

We aren't likely to see home prices drop anytime soon thanks to extremely limited supply. In fact, they'll likely rise this year as mortgage rates drop.

Fannie Mae researchers expect prices to increase 6.1% in 2024, while the Mortgage Bankers Association expects a 4.1% increase in 2024.

Lower mortgage rates will bring more buyers onto the market, putting upward pressure on prices. But prices aren't expected to increase as much as they have in recent years. 

Fixed-Rate vs. Adjustable-Rate Mortgage Pros and Cons

Fixed-rate mortgages lock in your rate for the entire life of your loan. Adjustable-rate mortgages lock in your rate for the first few years, then your rate goes up or down periodically.

So how do you choose between a fixed-rate vs. adjustable-rate mortgage?

ARMs typically start with lower rates than fixed-rate mortgages, but ARM rates can go up once your initial introductory period is over. If you plan on moving or refinancing before the rate adjusts, an ARM could be a good deal. But keep in mind that a change in circumstances could prevent you from doing these things, so it's a good idea to think about whether your budget could handle a higher monthly payment.

Fixed-rate mortgage are a good choice for borrowers who want stability, since your monthly principal and interest payments won't change throughout the life of the loan (though your mortgage payment could increase if your taxes or insurance go up).

But in exchange for this stability, you'll take on a higher rate. This might seem like a bad deal right now, but if rates increase further down the road, you might be glad to have a rate locked in. And if rates trend down, you may be able to refinance to snag a lower rate 

How Does an Adjustable-Rate Mortgage Work?

Adjustable-rate mortgages start with an introductory period where your rate will remain fixed for a certain period of time. Once that period is up, it will begin to adjust periodically — typically once per year or once every six months.

How much your rate will change depends on the index that the ARM uses and the margin set by the lender. Lenders choose the index that their ARMs use, and this rate can trend up or down depending on current market conditions.

The margin is the amount of interest a lender charges on top of the index. You should shop around with multiple lenders to see which one offers the lowest margin.

ARMs also come with limits on how much they can change and how high they can go. For example, an ARM might be limited to a 2% increase or decrease every time it adjusts, with a maximum rate of 8%.