Mortgage Interest Rates Today, July 6, 2024 | Rates Ticked Up Closer to 7% This Week
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Mortgage rates have started July a bit higher than they were last month, with 30-year mortgage rates averaging around 6.71% this week, according to Zillow data. But recent economic data suggests that rates should trend back down soon.
On Friday, the Bureau of Labor Statistics reported that the U.S. economy added 206,000 jobs in June. This is slightly above expectations but still a slowdown from the previous month. The unemployment rate also ticked up from May's 4.0% reading to 4.1%.
Labor market slowing has generally been seen as good news for mortgage rates this year because it increases the likelihood that the Federal Reserve will soon start cutting the federal funds rate.
In written commentary on this latest jobs report, Realtor.com chief economist Danielle Hale said that mortgage rates are likely to stay in their current range in the near term. But once we get closer to a potential Fed cut, rates should ease.
"Job gains were modest enough to prevent a big surge in interest rates, but strong enough to stave off worries that a hard landing could be ahead," Hale wrote. "Meanwhile, the modest uptick in unemployment could help interest rates drift toward the lower end of the range until next week's inflation reports."
Mortgage Rates Today
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30-Year Fixed Mortgage Rates
The average 30-year fixed mortgage rate was 6.95% this week, according to Freddie Mac. This is nine basis points higher than it was the week before.
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 6.25% this week, according to Freddie Mac data, which is a nine-basis-point increase from the previous week.
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.
Are Mortgage Rates Going Down?
Mortgage rates increased throughout most of 2023. But mortgage rates are expected to trend down in the coming months and years.
In the last 12 months, the Consumer Price Index rose by 3.3%. As inflation comes down and the Federal Reserve is able to start cutting the federal funds rate, mortgage rates should fall further as well.
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 Fed aggressively raised the federal funds rate in 2022 and 2023 to slow economic growth and get inflation under control. As a result, mortgage rates spiked.
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.
Now that the Fed has paused hiking rates, mortgage rates have come down a bit. Once the Fed starts cutting rates, which may happen this year, mortgage rates should fall even further.