Mortgage Interest Rates Today, October 30, 2023 | How This Week's Fed Meeting Could Impact Rates
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This will probably be a significant week for those wondering when mortgage rates will finally fall. Currently, mortgage affordability is at its lowest level in over two decades, with 30-year mortgage rates hovering near 8%. But rates could start heading back down soon.
The Federal Reserve will wrap up its latest meeting on Wednesday, which means we'll soon get some updated commentary on where the central bank sees inflation heading in the coming months.
If Fed officials believe that they're closing in on their goal of 2% inflation, we could see mortgage rates inch down a bit in anticipation of future cuts to the federal funds rate.
Additionally, the Bureau of Labor Statistics will release the latest jobs report on Friday, which will give us updated data on whether the labor market is continuing to cool. Slowing job growth suggests that the economy is returning to normal, which means that inflation should, too.
Mortgage rates are expected to trend down throughout 2024 and 2025 as the economy cools. But borrowers should keep an eye on the latest economic data to gauge when exactly we might start to see lower rates.
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30-year Fixed Mortgage Rates
Last week, the average 30-year fixed mortgage rate was 7.79%, according to Freddie Mac. This is a 16-point increase from the previous week.
The 30-year fixed-rate mortgage is the most common type of home loan. With this type of mortgage, you'll pay back what you borrowed over 30 years, and your interest rate won't change for the life of the loan.
The lengthy 30-year term allows you to spread out your payments over a long period of time, meaning you can keep your monthly payments lower and more manageable. The trade-off is that you'll have a higher rate than you would with shorter terms or adjustable rates.
15-year Fixed Mortgage Rates
Average 15-year mortgage rates were 7.03% last week, an 11-point increase compared to the prior week, according to Freddie Mac data. This is the first time this rate has surpassed 7% since December 2000.
If you want the predictability that comes with a fixed rate but are looking to spend less on interest over the life of your loan, a 15-year fixed-rate mortgage might be a good fit for you. Because these terms are shorter and have lower rates than 30-year fixed-rate mortgages, you could potentially save tens of thousands of dollars in interest. However, you'll have a higher monthly payment than you would with a longer term.
When Will Mortgage Rates Go Down?
Mortgage rates started ticking up from historic lows in the second half of 2021 and increased over three percentage points in 2022. Rates have increased dramatically this year.
As inflation comes down, mortgage rates will recede somewhat as well. If we experience a recession, rates may drop a little faster. But average 30-year fixed rates will likely remain somewhere in the 7% to 8% range in the near term.
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 our 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.
How Do Fed Rate Hikes Affect Mortgages?
The Federal Reserve has been increasing the federal funds rate this year to try to slow economic growth and get inflation under control. So far, inflation has slowed, but it's still above the Fed's 2% target rate.
Mortgage rates aren't directly impacted by changes to the federal funds rate, but they often trend up or down ahead of Fed policy moves. This is because mortgage rates change based on investor demand for mortgage-backed securities, and this demand is often impacted by how investors expect Fed hikes to affect the broader economy.
As inflation starts to come down, mortgage rates should, too. But the Fed has indicated that it's watching for sustained signs of slowing inflation.