Today's Mortgage Rates - 09/20/2024

Rates Lower Pre-Fed, Firmer Post

Mortgage rates settled lower again this week as the Fed meeting approached, but seem to have firmed up a smidgen after it.

Freddie Mac reported today that the average offered interest rate for a conforming 30-year fixed-rate mortgage (FRM) declined by another eleven basis points (0.11%) to 6.09%, marching a 2023 Groundhog Day level.

The average offered rate for 15-year fixed-rate mortgages declined slightly more, posting a twelve basis point (0.12%) fall to 5.15%. the lowest it has been since early February 2023, too.

A 5/1 ARM might offer a homebuyer slightly lower-cost alternative to a long-term fixed-rate mortgage, but the difference in rate between 30-year FRMs and 5/1 ARMs has not been all that expansive of late. The Mortgage Bankers Association reported that the initial fixed interest rate on a hybrid 5/1 ARM joined its fixed-rate siblings in decline, posting a nineteen basis points drop (0.19%) to 5.66%. The 43 basis point difference between the rate for a 30-year FRM and that for a 5/1 ARM is quite narrow, so an ARM may not be a very compelling choice for a potential homebuyer at present.

Even when the call of ARMs is strong, it's important to remember that ARMs are not a set-it-and-forget-it loan product, and there are potential risks and possible rewards for selecting one. If you're interested in learning the advantages (and drawbacks) of ARMs, you should read HSH's comprehensive Guide to Adjustable Rate Mortgages.

As expected, the Federal Reserve cut interest rates this week, but chose to start the new interest-rate cycle with a half-point cut in the federal funds target rate, trimming the key policy rate for the first time since start of the pandemic more than four years ago.

Investors were hoping for the larger cut to come, but even up to the close of the meeting it was unclear whether the move would be a more typical quarter-point change or something more. At least some Fed members considered lowering rates back un July, but the central bank held off; since then, softening labor market conditions and continued progress gave Fed members the confidence to move more boldly. As has been the case, incoming data on inflation, labor markets and economic growth will dictate what the Fed does next,

It's not uncommon to see mortgage and other long-term rates firm up a little after the Fed cuts rates, at least for a time. Fed cuts can spur economic growth, which helps make stocks more attractive than bonds, and money can flow out of bonds, lifting their yields, and in return, fixed mortgage rates. That said, there's little reason to expect any significant change in mortgage rates in the coming days, but they could be just a little bit firmer.

Each week in HSH's MarketTrends newsletter, we track and discuss economic conditions that affect mortgage rates and their impact on housing markets and consumers. Read the most recent edition of MarketTrends or subscribe for email delivery.