Mortgage rates edged down this week, snapping a two-week streak of increases and reaching their lowest point since May.

The average rate on a 30-year loan was 6.60% — a decrease of 0.06 percentage points — for the week ending January 18, according to Freddie Mac’s weekly survey. The rate on a 15-year fixed-rate mortgage was also lower, averaging 5.76%.

Lower rates are good news for the housing market and first-time buyers in particular, said Sam Khater, Freddie Mac’s chief economist, in a press release. However, lower rates also bring more buyers out, which will “put more pressure on already depleted inventory for sale.”

If you’re offered a higher rate than expected, make sure to ask why and compare offers from multiple lenders. (Money’s list of the Best Mortgage Lenders is a good place to start. Homeowners considering a mortgage refinance should consider our list of the Best Mortgage Refinance Companies.)

Use Money’s mortgage calculator to get an estimate of your monthly payment, taking different rate scenarios into consideration.

• How are mortgage rates impacting home sales?
• What credit score do mortgage lenders use?
• What is a good interest rate on a mortgage?
• How are mortgage rates determined?
• How to get the best mortgage rate
• Difference between APR and interest rate

What’s been happening in the housing market

Here’s what’s happening in the housing market this week:

• Builder confidence jumped up by 7 points in January, according to the National Association of Home Builders. It’s the second month in a row where home builders have expressed increased confidence in the housing market — and it’s all thanks to falling mortgage rates.
• Seller concessions are coming back: Rate buy downs and lower closing costs still top buyers’ wish lists, but paid-off home warranties are also becoming a popular incentive. Appliances can fail at any time, the thinking goes, and a home warranty protects buyers from having to shell out money for an HVAC system or washer/dryer combo shortly after buying a new home.
• Mortgage rates may be on the way down, but one cost that is likely to keep rising is homeowners insurance. Experts predict insurance rates could rise by 10% to 15% this year.

Mortgage interest rates for the week ending January 18, 2024

Mortgage rate trends

This week, mortgage rates were lower:

• The current rate for a 30-year fixed-rate mortgage is 6.60%, a week-over-week decrease of 0.06 percentage points. Last year, the 30-year rate averaged 6.15%.
• The current rate for a 15-year fixed-rate mortgage is 5.76%, down by 0.11 percentage points compared to a week ago. The 15-year rate averaged 5.28% percentage points this time last year.

For its weekly rate analysis, Freddie Mac looks at rates offered for the week ending each Thursday. The average rate represents roughly the rate a borrower with strong credit and a 20% down payment can expect to see when applying for a mortgage right now. Borrowers with lower credit scores will generally be offered higher rates.

Money’s average mortgage rates for January 18, 2024

Rates were higher for all mortgage types on Wednesday. The 30-year fixed-rate loan averaged 7.826%, an increase of 0.151 percentage points.

• The latest rate on a 30-year fixed-rate mortgage is 7.826% ⇑ 0.151%
• The latest rate on a 15-year fixed-rate mortgage is 6.517% ⇑ 0.134%
• The latest rate on a 5/6 ARM is 7.685%. ⇑ 0.031%
• The latest rate on a 7/6 ARM is 6.163%. ⇑ 0.205%
• The latest rate on a 10/6 ARM is 7.891% ⇑ 0.144%

Money’s daily mortgage rates are a national average and reflect what a borrower with a 20% down payment, no points paid and a 700 credit score — roughly the national average score — might pay if they applied for a home loan right now. Each day’s rates are based on the average rate 8,000 lenders offered to applicants the previous business day. Your individual rate will vary depending on your location, lender and financial details.

These rates are different from Freddie Mac’s rates, which represent a weekly average based on a survey of quoted rates offered to borrowers with strong credit, a 20% down payment and discounts for points paid.

Today’s mortgage rates and your monthly payment

The rate on your mortgage can make a big difference in how much home you can afford and the size of your monthly payments.

If you bought a $250,000 home and made a 20% down payment — of $50,000 — you would end up with a starting loan balance of $200,000. On a $200,000 home loan with a fixed rate for 30 years, here’s what you would pay:

• At a 3% interest rate = $843 in monthly payments (not including taxes, insurance, or HOA fees)
• At a 4% interest rate = $955 in monthly payments (not including taxes, insurance, or HOA fees)
• At a 6% interest rate = $1,199 in monthly payments (not including taxes, insurance, or HOA fees)
• At an 8% interest rate = $1,468 in monthly payments (not including taxes, insurance, or HOA fees)

You can experiment with a mortgage calculator to find out how much a lower rate or other changes could impact what you pay. A home affordability calculator can also give you an estimate of the maximum loan amount you may qualify for based on your income, debt-to-income ratio, mortgage interest rate and other variables. The Consumer Financial Protection Bureau can also provide a range of rates being offered by lenders in each state.

Other factors determine how much you’ll pay each month, which are detailed in the loan disclosures provided by your lender. These factors include:

Loan Term:

Choosing a 15-year mortgage instead of a 30-year mortgage will increase monthly mortgage payments but reduce the amount of interest paid throughout the life of the loan.

Fixed vs. ARM:

With a fixed-rate loan, payments remain the same throughout the life of the loan. The mortgage rates on adjustable-rate mortgages reset regularly (after an introductory period) and monthly payments change with it.

Taxes, HOA Fees, Insurance:

Homeowners’ insurance premiums, property taxes and homeowners association fees are often bundled into your monthly mortgage payment. Check with your real estate agent to get an estimate of these costs.

Mortgage Insurance:

Mortgage insurance can cost up to 1% of your home loan’s value per year. Borrowers with conventional loans can avoid private mortgage insurance by making a down payment of at least 20% or reaching 20% of the home’s equity. FHA borrowers pay a mortgage insurance premium throughout the life of the loan.

Closing Costs:

Some buyers finance their new home’s closing costs into the loan, which adds to the debt and increases monthly payments. Closing costs generally run between 2% and 5% of the value of the mortgage.

Current Mortgage Rates Guide

Mortgage rates are an important part of the homeownership puzzle. Our guide answers some of the most common questions surrounding mortgage rates and how they affect the housing market.

What credit score do mortgage lenders use?

Most mortgage lenders use your FICO score — a credit score created by the Fair Isaac Corporation — to determine your loan eligibility.

Lenders typically request a merged credit report that combines information from all three of the major credit reporting bureaus — Experian, Transunion and Equifax. This report will also contain your FICO score as reported by each credit agency.

Each of the three credit bureaus is likely to have a different FICO score, and your lender will typically use the middle score when evaluating your creditworthiness. If you are applying for a mortgage with a partner, the lender could base their decision on the average credit score of both borrowers.

Lenders may also use a more thorough residential mortgage credit report that includes more detailed information than that in your standard reports, such as employment history and current salary.

What is a good interest rate on a mortgage?

A good mortgage rate is one that allows you to comfortably afford the monthly payments, and where the other details of the loan also fit your needs. Consider details such as the loan type (i.e. whether the rate is fixed or adjustable), length of the loan, origination and lender fees and other costs. Note that refinance rates tend to be higher than purchase rates for a primary residence.

Keep in mind that today’s mortgage rates remain fairly high, historically speaking. Freddie Mac’s average rates show what a borrower with a 20% down payment and a strong credit score might be able to get if they were to speak to a lender this week.

If you are making a smaller down payment, have a lower credit score or are taking out a non-conforming (or jumbo loan) mortgage, you may see an even higher rate. It’s also worth noting that jumbo loans have a higher down payment requirement than conventional loans. Money’s daily mortgage rate data shows borrowers with 700 credit scores are finding rates averaging above 8% right now.

How are mortgage rates determined?

Lenders use several factors to set rates each day. Every lender’s formula will be a little different but will factor in the current federal funds rate (a short-term rate set by the Federal Reserve), competitors’ rates and even how many staff they have available to underwrite loans. Your qualifications will also impact the rate you are offered, naturally.

In general, rates track the yields on the 10-year Treasury note. Average mortgage rates are usually about 1.8 percentage points higher than the yield on the 10-year note.

Yields matter because lenders don’t keep the mortgage they originate on their books for long. Instead, to free up money to keep originating more loans, lenders sell their mortgages to entities like Freddie Mac and Fannie Mae. These mortgages are then packaged into what are called mortgage-backed securities, which are sold to investors. Investors will only buy these securities if they can earn a bit more than they can on the government notes.

Your qualifications will also impact the rate you are offered, as will the loan-to-value ratio (LTV). The LTV of your property is one way lenders assess the amount of risk posed by approving a loan and is calculated by dividing the maximum loan amount you qualify for by the appraised home value.

How to get the best mortgage rate

Shopping around for the best mortgage rate can mean a lower rate and big savings. On average, borrowers who get a rate quote from one additional lender save $600 over the life of the loan, according to Freddie Mac. Those savings go up to $1,200 if you get three quotes. A larger down payment amount will also result in a lower interest rate.

The best mortgage lender for you will be the one that can give you the lowest rate and the terms you want. Your local bank or credit union is one place to look. Online lenders have expanded their market share over the past decade and promise to get you pre-approved within minutes.

Shop around to compare loan options, rates and terms, and make sure your lender has the type of mortgage you need. Not all lenders write FHA loans, USDA-backed mortgages or VA loans, for example. If you’re not sure about a lender’s credentials, ask for its NMLS number and search for online reviews.

What’s the difference between interest rate and APR on a mortgage?

Borrowers often mix up interest rates and annual percentage rates (APR). That’s understandable since both rates refer to how much you’ll pay for the loan. While similar, the terms are not synonymous.

An interest rate is what a lender will charge on the principal amount being borrowed. Think of it as the basic cost of borrowing money for a home purchase.

An APR represents the total cost of borrowing money and includes the interest rate plus any fees, associated with generating the loan. The APR will always be higher than the interest rate.

For example, a $300,000 loan with a 3.1% interest rate and $2,100 in fees would have an APR of 3.169%.

When comparing rates from different lenders, look at both the APR and the interest rate. The APR will represent the true cost over the full term of the loan, but you’ll also need to consider what you’re able to pay upfront versus over time.

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Current mortgage rates FAQ

When will mortgage rates go down?

Mortgage rates have been trending lower after hitting a high of 7.08% last November. While most experts believe rates will eventually move into the 5% range, borrowers should expect them to remain between 6% and 7% for the foreseeable future.

Should I lock in my mortgage rate today?

Yes. Obtaining a mortgage rate lock as soon as you have an accepted offer on a house (and find a rate you're comfortable with) can help guarantee a competitive rate and affordable monthly payments on your loan. A rate lock means that your lender will guarantee your agreed-upon rate, typically for 45 to 60 days, regardless of market fluctuations. Ask your lender about "float-down" options as well, which allow you to snag a lower interest rate if average rates drop during your lock period. This option usually comes with a fee that ranges between 0.50% and 1% of the loan amount.

What are discount points on a mortgage?

Discount points are a way for borrowers to reduce the interest they pay on a mortgage. By buying points, you're basically prepaying some of the interest the bank charges on the loan. In return, you get a lower interest rate, which can lead to lower monthly payments and additional savings on the cost of the loan over its full term. Each mortgage point normally costs 1% of your loan amount and could shave up to 0.25 percentage points off your interest rate.

Why is my mortgage rate higher than average?

You may have a higher-than-average mortgage rate for a number of reasons. Credit scores, loan terms, interest rate types (fixed or adjustable), down payment size, home location and loan size will all affect the rate offered to individual home shoppers. One of the best ways to lower your rate is to improve your credit score.

Different mortgage lenders offer different rates. It's estimated that about half of all buyers only look at one lender, primarily because they tend to trust referrals from their real estate agent. But shopping around for a lender will help you snag the lowest rate out there.

Should I refinance my mortgage when interest rates drop?

Refinancing your mortgage when interest rates drop could make sense if it provides a tangible benefit; be it lower monthly payments or a shorter loan term. Determining whether now is the right time to refinance your home loan involves a number of factors. Most experts say you should consider refinancing if your current mortgage rate exceeds today's rates by at least 0.50 percentage points. But since there are fees involved, it doesn't make sense to refinance every time rates inch down.

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Summary of current mortgage rates

This week, mortgage rates were lower:

• The current rate for a 30-year fixed-rate mortgage is 6.60%, a week-over-week decrease of 0.06 percentage points. Last year, the 30-year rate averaged 6.15%.
• The current rate for a 15-year fixed-rate mortgage is 5.76%, down by 0.11 percentage points compared to a week ago. The 15-year rate averaged 5.28% percentage points this time last year.