Since September of 2023, the Federal Reserve has held the federal funds rate, a key overnight bank lending rate, at unchanged levels. Previously, there were 11 rate hikes that began in March 2022 in an attempt to combat inflation, which has caused consumers to face higher commercial interest rates, especially mortgage rates. But good news for borrowers — interest rate cuts are expected for later this year.
Although mortgage rates are largely dependent on the 10-year Treasury yield and not the federal funds rate, they've started to come down. According to , as of March 20, the most recently available data, the average 30-year mortgage rate was 6.74%. There have been declines totaling almost a quarter of a percentage point over the last two weeks. Despite the recent dip, mortgage rates remain high.However, as many expected, the Federal Reserve held interest rates steady at the latest , following four previous rate pauses. This means that the federal funds rate will remain the same, at a target range of 5.25% to 5.5%. And the Fed is still expected to cut rates later this year.
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Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail. Profit and prosper with the best of expert advice - straight to your e-mail.Along with food, energy and real estate prices remaining high, home ownership can feel extremely challenging at the moment. As a result, many first-time buyers are backing out of the market altogether. For current homeowners, a reveals that in March, mortgage payments hit the highest they've ever been. The results showed the typical homeowner paying $2,563 on mortgage payments, 29% higher than they'd have paid in 2022.
Not surprisingly, the latest Home Purchase Sentiment report from shows that a decline of 3.6 points saying "the decline was partly driven by a substantial decrease in consumers’ sense of home-selling conditions."How to get the lowest rate
Follow these tips to shop for low mortgage rates.- Increase down payment: The bigger the down payment you make on a house, the better your rate. To qualify for the lowest rates you’ll likely need a 20% down payment.
- Raise credit score: The most important factor in determining your mortgage rate is your credit score. The higher your score, the less risk you pose to lenders, so it’s important to raise your credit score as much as possible before applying for a mortgage. Typically, you’ll need to have a FICO score of 760 or higher in order to be eligible for the lowest rates.
- Consider an adjustable-rate mortgage: An adjustable-rate mortgage (ARM) starts out with rates lower than those you’d get with a fixed-rate mortgage. After a certain time period, the rates will adjust based on market indexes. If you know you will be selling your home in the future, this could be a good option to save on interest.
- Shop around: It’s important to get multiple quotes before applying for a mortgage, and you can often find lower mortgage rates from local lenders and credit unions. Try a mortgage comparison tool to find the best rates for you.
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