Getting the best 30-year mortgage rate possible can save you thousands of dollars a year. As the Federal Reserve has begun cutting interest rates, mortgage rates are finally starting to fall from the high 6-7% range they were at for most of 2023 and 2024.
While the Federal Reserve does not directly control mortgage rates, its actions do influence rates indirectly. After the Fed started cutting rates in September, average mortgage rates dipped to just above 6%. Mortgage rates are ending the year higher than that, at 6.85% according to Freddie Mac.
Nevertheless, there are hopes that the situation will improve in 2025 as the Fed continues its work. If mortgage rates lower, more people will be willing to move, making more homes available and potentially, eventually, unlocking the housing market. At that point, it's key to know where to go to find the best mortgage rate for you.
Sign up for Kiplinger’s Free E-Newsletters
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.
30-year mortgage rates
The average interest rate for a 30-year fixed mortgage is 6.85% as of December 26, and the interest rate for a 15-year fixed mortgage is 6%.
If you're looking for the lowest mortgage rate, you should shop around. The financial institution you usually work with may not have the best rate available, so you should look at multiple options before deciding where to go.
And mortgage rates have a massive impact on your monthly cash flow and what you overall end up paying. Let's take the median American home sale price of $420,000. Assume you put down 20% ($84,000) and get a $336,000 mortgage. At 6.85%, you'd be paying $2,201.67 on your monthly mortgage payment. But at 6.65%, you'd be paying $2,157 monthly — $536 less each year.
Use our tool, in partnership with Bankrate, to compare current mortgage rates available for purchase:
If you already have a mortgage, remember that you can refinance. This was a plan for many people who bought while interest rates were high. The expectation was that when rates went down, they'd be able to refinance and get a better deal. Read more on how refinancing a mortgage works and what it costs.
Rates haven't gone down quite enough to make this an entirely attractive prospect yet, but the expectation is that in the future they will. See what the options are now for refinancing, with our tool, in partnership with Bankrate:
Four ways to get a lower mortgage rate
- Raise your credit score: One of the best and most effective ways to save on your mortgage is to raise your credit score, the biggest factor in determining your mortgage rate. Upping your FICO credit score, which ranges from 300 to 850, by just 20 points can save you hundreds of dollars by lowering your mortgage. So, while you’ll likely need at least a 620 FICO score in order to qualify for a mortgage at any rate, you'll need a higher score to get approved for the best rates. Raising your credit score can be done in a number of ways, including making card payments on time and keeping balances low.
- Increase your down payment: In order to get the best rates on a conventional mortgage loan from Fannie Mae or Freddie Mac, you'll need to make at least a 20% down payment. In fact, the bigger your down payment is, the better your rate will likely be. You'll have to repay less principal and less interest over the life of the loan.
- Get multiple quotes: Different lenders may offer different rates. Because of this, it's important to get multiple quotes to ensure you're getting the lowest interest rates available for you.
- Consider an adjustable-rate mortgage (ARM): if you know you're going to sell your home in the near future, opting for an ARM could be a good decision. For example, if you're going to sell your home in four years, choosing a 5 year ARM could save you a lot in interest. You'll be able to take advantage of the lower interest rates associated with this kind of mortgage, and won't have to worry about your rate changing before you sell.
Good luck, and happy hunting.
Related Content
-
How to Organize Your Financial Life (and Paperwork)To simplify the future for yourself and your heirs, put a financial contingency plan in place. The peace of mind you'll get is well worth the effort.
-
Financial Confidence? It's Just Good Planning, Boomers SayBaby Boomers may have hit the jackpot money-wise, but many attribute their wealth to financial planning and professional advice rather than good timing.
-
Will 2025 Be a Good Year to Sell Your House?Explore whether 2025 is the right time to sell your home. Learn about trends in mortgage rates, home prices, buyer demographics and economic factors shaping the housing market.
-
Should You Buy a Vacation Home?If you vacation to a beloved destination again and again, purchasing a home there may be a smart move — but don’t overlook the costs and effort that go into it.
-
First-time Homebuyers Are Older Than Ever, Survey RevealsFirst-time homebuyers are now in their late 30s and jostle with cash-rich buyers in the race to buy a home, new research from the National Association of Realtors has found.
-
Should You Refinance Your Mortgage Now That the Fed Just Cut Rates?The Fed just cut rates, so mortgage refinance rates will be cheaper. Should you act now, or wait?
-
Mortgage Rates Are Falling: 10 Housing Markets That Could Benefit the MostThese are the top 10 metro areas where the most mortgages are unlocked by lower rates. Plus, the magic number for mortgage rates.
-
With Mortgage Rates Dipping, Is Now a Good Time to Buy a House?Pricing pressure, interest rates, and rising unemployment numbers have sidelined homebuyers. But now that the Fed has cut rates, is it a good time to think about getting back into the market?
-
How Much It Costs to Refinance a Mortgage and Other Questions to ConsiderRefinancing a mortgage works by replacing your current mortgage with a new one. It can save you money or let you tap the equity in your home, but it can take time to break even after upfront costs.
-
How Retirees Can Downsize In Today's Housing MarketRising prices, higher interest rates and a tight supply of smaller homes present challenges. But retirees have an edge.
