Today's Mortgage Rates - 09/17/2024

Mortgage Rates Drop Again

Mortgage rates headed lower this week in advance of what the Fed may do and say.

As reported by Freddie Mac, the average offered interest rate for a conforming 30-year fixed-rate mortgage (FRM) declined by fifteen basis points (0.15%) to 6.20%, its lowest level since February 2023.

The average offered rate for 15-year fixed-rate mortgages even more space to decline, easing by twenty basis points (0.20%) to 5.27% this week. Most commonly used by homeowners who are refinancing existing loans, the average rate for the most prevalent shorter-term mortgage now stands at its lowest level since the week of Groundhog Day last year.

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, falling by thirteen basis points (0.13%) to 5.85%. The 35 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 is usually the case, financial markets and interest rates have adjusted their positions in advance of the coming Fed meeting, which takes place on September 17-18. With the labor markets softening but not collapsing, and inflation flattening gradually toward the Fed's target, a quarter-point cut in the federal funds rate is all but assured.

As investors already widely expect this and have planned for it, the focus will turn toward what the central bank indicates about the future direction of interest rates. The updated Summary of Economic Projections (SEP) will detail member's forecasts for inflation, unemployment and how much they expect to be cutting rates in the coming months. Futures markets still seem to be expecting that there will be both multiple and more sizable cuts in rates coming before 2024 comes to a close, but unless economic and labor conditions deteriorate rapidly, the Fed is more likely to make only quarter-point trims.

The yields that most influence mortgage rates have been both down some and then back up some this week, but on balance so far are a little below where they began the week. This suggests that mortgage rates could be even a little bit lower still in the coming few days.

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.