Today’s Mortgage Rates Drop to 6.73% Ahead of Key Fed Meeting

Mortgage rates dipped this morning, offering a much-needed respite for homebuyers and refinancers as the Federal Reserve’s meeting approaches. On December 16, 2024, both fixed-rate and adjustable-rate mortgages saw declines for the week, bringing hope for more affordability in the housing market. The modest drops come amid anticipation of fresh signals from the Fed, which is expected to announce a further rate cut on December 18, 2024. What does this mean for markets, borrowers, and the future of home financing? Let’s break down today’s developments in comprehensive detail.

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Today’s Mortgage Rates Drop to 6.73% Ahead of Key Fed Meeting – December 16, 2024

Key Takeaways

• Mortgage rates are trending down for all major loan types (Bankrate).
  • 30-year fixed-rate mortgage: 6.73%, down from last week’s 6.79% (-6 basis points).
  • 15-year fixed-rate mortgage: 6.04%, down from last week’s 6.11% (-7 basis points).
  • 30-year jumbo mortgages: 6.82%, down 6 basis points.
  • 5/1 adjustable-rate mortgages (ARM): Declined to 6.27%, a dip of 5 basis points.
• Federal Reserve meeting looms large: Anticipation of a rate cut announcement is driving market optimism and influencing declining bond yields.
• Will the trend last? Experts predict minimal rate movement during the holidays, though further declines in early 2025 aren’t guaranteed.
• Refinance opportunities: The average 30-year refinance rate also fell from 6.79% to 6.74%, presenting potential savings for homeowners.

Why exactly are rates falling right now? What does the Fed meeting have to do with it? And more importantly, what does it mean for those considering buying or refinancing? Let’s dig in.

What’s Behind Today’s Mortgage Rate Decline?

Mortgage rates tend to follow broader market movements, particularly fluctuations in the 10-year Treasury yield. Treasury yields have been easing in recent days, reflecting investor speculation over the actions of the Federal Reserve. Current expectations lean toward the Fed announcing another 25-basis-point rate cut during its two-day meeting on December 17-18, 2024.

The role of inflation can’t be ignored either. Despite fluctuations earlier in the year, some inflation indicators have finally begun to stabilize after peaking in mid-2023. With the Federal Reserve maintaining its commitment to curbing inflation while sustaining economic growth, the broader financial market seems to have settled into cautious optimism.

According to CNET Finance, December 2024 marks the third straight week of falling rates across major mortgage types. This stabilization is welcome, though rates remain notably higher compared to the record lows seen earlier in the decade during the COVID-19 era.

30-Year Fixed-Rate Mortgages Hit 6.73%

For most buyers, the 30-year fixed-rate mortgage remains the standard, and today’s rate of 6.73% offers some relief after weeks of fluctuations, according to Bankrate. A slight decline of 6 basis points from last week’s 6.79% might sound modest, but it can translate to tangible savings for homeowners.

At today’s rate, your approximate monthly payment for every $100,000 borrowed is $647.27, which represents a reduction of about $3.99 compared to last week. While this drop may seem small over the course of a month, the cumulative effect over years of repayment—with reduced interest—can be significant.

👉 Why it matters: Borrowers have the opportunity to lock in rates that are creeping closer to historical norms but remain lower than earlier 2023 highs. While affordability is still a major challenge due to elevated home prices, these rate adjustments make financing slightly easier to manage.

15-Year Fixed Mortgages: Down to 6.04%

Rates for 15-year fixed mortgages experienced the largest decrease among popular loan types. With a decline of 7 basis points to reach 6.04%, today’s rates make this option attractive for individuals aiming to accelerate their homeownership journey and minimize long-term interest expenses.

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At this rate, monthly payments will cost approximately $846 per $100,000 borrowed, requiring a higher upfront budget compared to 30-year counterparts. However, the benefits include potentially saving tens of thousands of dollars in interest while building equity faster. This type of mortgage is best suited for those with more financial flexibility who are determined to pay off their homes sooner.

5/1 Adjustable Rate Mortgages Offer Short-Term Options

The 5/1 adjustable-rate mortgage (ARM), which has both its advocates and critics, saw a rate decrease to 6.27%, marking a drop of 5 basis points. During the first five years, this loan’s rate remains fixed, after which it adjusts annually based on market conditions.

For borrowers expecting to sell or refinance within five years, today’s rates promise slightly reduced monthly payments—approximately $617 per $100,000 borrowed.

However, this option comes with risks. The certainty of lower initial payments may be appealing, but after the initial period ends, rates can rise significantly, leading to potentially higher payments in the long term. For this reason, 5/1 ARMs appeal most to younger borrowers who are planning short-term stays in their newly financed homes.

Jumbo Loans: 6.82% for High-End Borrowers

Mortgage rates on jumbo loans, designed for high-value properties exceeding conforming loan limits, also declined to an average of 6.82%. This is a decrease of 6 basis points from last week. For high-net-worth individuals purchasing luxury real estate, this slight dip translates into real savings due to the larger loan balances associated with jumbo mortgages.

👉 At today’s average rate, a jumbo loan of $1 million would incur monthly principal and interest payments of approximately $6,532.60, saving the borrower about $40 compared to last week.

How Is the Federal Reserve Influencing This Decline?

The Federal Reserve’s role in steering market perception plays a major part in today’s mortgage rate changes. Though the Fed doesn’t directly set mortgage rates, its management of the federal funds rate indirectly impacts borrowing costs.

Last month, the Fed implemented a 0.25% rate cut, and December could see another reduction. These cuts signal a general easing of monetary policy, which tends to lower the cost of borrowing across various lending categories.

Experts like Derek Egeberg from Guild Mortgage anticipate that these shifts will foster greater market stability through the holiday season. As Egeberg puts it, “the markets will likely remain steady until we enter 2025,” unless there’s a sudden change in the economy or Fed policy.

Will Mortgage Rates Continue to Drop?

The big question is whether this downtrend will persist. Given the current climate, further significant declines seem unlikely in the immediate future, according to analysts. Inflation remains a moderate concern, and mortgage rates today—though lower than their May 2024 peaks—are still higher than the sub-4% rates seen just a few years ago.

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Looking ahead into 2025, much hinges on:

• The Fed’s continued rate adjustments in Q1 and beyond.
• Economic stability under the incoming administration.
• Housing market supply-demand trends, particularly as listings increase post-holiday.

What Does This Mean for Refinancing?

For homeowners with older loans locked in at higher rates, today’s 30-year fixed refinance rate of 6.74% offers a chance to streamline monthly payments. Though refinancing activity tends to slow at year-end, this dip presents an opportunity for borrowers to adjust terms and reduce interest costs.

At this rate, you’ll pay $647.93 per $100,000 borrowed, a $3.33 drop compared to last week. However, borrowers must consider upfront costs and whether current savings justify the decision.

Final Thoughts: Where Do We Go From Here?

Today’s mortgage rate declines are a welcome shift for borrowers at a time when affordability remains a housing market challenge. Though small, these changes signal wider shifts influenced by the Federal Reserve’s monetary policy and overall market optimism. Borrowers should stay informed about upcoming Fed announcements to anticipate where rates might head in early 2025.

With steady post-pandemic recovery and inflation stabilizing, rates may hover near these levels through the holiday season. Be sure to explore adjustable and fixed-rate options to determine which one aligns best with your financial goals before year-end.