Mortgage rates are falling slightly. Zillow reports that the national average 30-year fixed rate mortgage is at 6.60%, while the 15-year fixed rate is at 5.87%. But if you are holding out hope that mortgage rates will return to three percent, it’s not likely anytime soon.
Mortgage rates have come down from the peak of nearly 8% seen in late 2023 and are expected to continue to fall due to the declining inflation. The National Association of Realtors (NAR) predicts that 30-year mortgage rates will bottom out around 5.8% toward the end of 2025.
If you are in the market for a home, here are a few factors that affect mortgage rates:
- The mortgage lender. Shop around and compare the rates and lender’s fees.
- Credit score. Review and do what you can to improve your credit score.
- Debt-to-income (DTI) and loan-to-value (LTV) ratios. Lenders are adamant about their ratios. You need to find a home in the right price range and increase your down payment if possible.
- Type of loan. It may be beneficial to look at shorter term fixed rate mortgages, or even the adjustable-rate-mortgages (ARM). Find the type of loan that works best for you.
- Other factors include the 10-Year Treasury yield, economic or geopolitical influences and inflation.
To help with planning, check out our free mortgage calculator to see how different interest rates and loan terms affect your monthly payment. The tool factors in home prices, down payments, interest rate and the term (years).
