Mortgage rates in the United States have fallen to the lowest level recorded since February 2023. Monthly mortgage payments could also follow suit soon.
The average contract rate for the 30-year fixed-term mortgage fell to 6.29% this week, according to data from the Mortgage Bankers Association (MBA). That is 0.14 points lower from last week's rate of 6.43%. It is the lowest level recorded since February 2023. It is also nearly a full percentage point lower than the 7.29% rate of the same week last year.
In addition, the average contract rate for the 15-year fixed-rate mortgage also fell this week, declining from 5.98% to 5.71%.
Why Mortgage Rates Declined
Mortgage rates have begun declining in recent weeks as the market; specifically the treasury yields, responds to an anticipated interest rate cut from the Federal Reserve on Sept. 18, per CNBC, citing MBA Vice President and Deputy Chief Economist Joel Kan.
If the Fed issues a cut to the federal funds rate next week, it will be the first in more than four years.
How Could the Fed Cut Affect Mortgage Payments
It is unclear how much the Fed plans to cut from their rates. Experts believe it could be between 25 basis points and half a percentage point.
When the Fed makes its formal cut this month, it could send lower mortgage rates. This, in turn, could reduce the monthly mortgage payments.
For perspective, we calculated monthly payments for a home with a median sale price of $433,229 at today's mortgage rates, assuming that the buyer has put in the conventional 20% down payment ($86,645.70).
- 30-year mortgage at 6.29%: $2,142.99
- 15-year mortgage at 5.71%: $2,870.64
Mortgage rates may or may not fall by the same increment as the federal funds rate does. However, assuming that they do and the Fed makes a cut of 25 basis points, monthly mortgage payments for homeowners would fall to:
- 30-year mortgage at 6.04%: $2,086.86
- 15-year mortgage at 5.46%: $2,824.52
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