Mortgage Rates Drop Below 7%

Sean McDonnell
cleveland.com
(via TNS)

Not long ago it looked like interest rates on mortgages would top 8%, but instead they’ve gone the other way.

The average rate on a 30-year fixed mortgage was 6.95% Thursday, according to Freddie Mac, a government-sponsored home-loan agency. It had gotten as high as 7.79% in October, which was the highest rate seen since 2000.

Rates on a 15-year fixed mortgage were 6.38%. The average rate on these loans peaked in late October, early November at 7.03%.

Sam Khater, Freddie Mac’s Chief Economist, said in a weekly report that rates are being affected by slowing inflation and the Federal Reserve, which hasn’t raised its interest rates recently and set the expectations that they’ll lower the federal funds target rate next year.

“Given inflation continues to decelerate and the Federal Reserve Board’s current expectations that they will lower the federal funds target rate next year, we likely will see a gradual thawing of the housing market in the new year,”

Rates have skyrocketed since January 2022, when the 30-year rate averaged 3.22% and a 15-year rate averaged 2.43%.

What this rate change means in dollars

The difference in interest rates can cost homebuyers thousands of dollars over the life of a loan. Even the change in the past seven weeks can make a noticeable difference on a monthly payment.

On a fixed rate 30-year loan at 7.79% — the rate back in October — a buyer would pay $1,080 a month in principal and interest for a $150,000 loan. Interest would add up to $238,500 over 30 years.

At 6.95%, the rate Thursday, the buyer would pay $993 a month, or $87 less. Interest would add up to $207,500 over 30 years.

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