What's Happening
26 minutes ago

US Stocks Set For A Cautious Start Ahead Of Inflation Data: Expert Says 'Strong Bull Markets Tend To Roar Back To Life After Corrections'

benzingabenzinga.com
44 minutes ago

'Racism Has No Place in Missouri': State Attorney General Sues Starbucks Over Hiring Policies

benzingabenzinga.com
45 minutes ago

Geopolitics And Resource Nationalism Are Choking The Commodity Supply

benzingabenzinga.com
55 minutes ago

'Investors Seem To Remain Poised For A Good Year In The Markets' Even As Valuation Remains Elevated, Says Fidelity's Macro Chief

benzingabenzinga.com
57 minutes ago

Have $100,000? Here Are 4 Ways to Grow That Money Into $1 Million for Retirement Savings

retireretire.ly
57 minutes ago

SMCI Stock Jumps Nearly 7% In Wednesday Pre-Market After Company Says It Will Meet SEC Filing Deadline

benzingabenzinga.com
1 hour ago

TRADEPULSE POWER INFLOW ALERT: BROADCOM (AVGO), RISES 2.1% AFTER ALERT FROM TRADEPULSE

benzingabenzinga.com
1 hour ago

NASA Alters Timelines To Expedite Return Of Astronauts Sunita Williams, Butch Wilmore Stranded At Space Station For Over 8 Months

benzingabenzinga.com
1 hour ago

Why Upstart Shares Are Trading Higher By Over 25%; Here Are 20 Stocks Moving Premarket

benzingabenzinga.com
2 hours ago

Marriott's Digital Penetration Hits 'Historic Highs' As Bonvoy App Downloads Soar Adding 31 Million New Members

benzingabenzinga.com
2 hours ago

Dow Gains Over 100 Points Following Powell Comments: Fear & Greed Index Remains In 'Neutral' Zone

benzingabenzinga.com
2 hours ago

Google I/O 2025 Officially Set For May — Here's What To Expect, From AI Breakthroughs To The Future Of Android And Pixel 9a

benzingabenzinga.com
2 hours ago

Mark Zuckerberg's Meta Eyes Acquisition Of Korean AI Chip Startup Founded By Former Samsung And AMD Engineer

benzingabenzinga.com
3 hours ago

Larry Summers And Peter Schiff Warn Of Rising Inflation Risks As Markets Slash Fed Rate Cut Expectations: 'Most Sensitive Moment'

benzingabenzinga.com
3 hours ago

Meta Stock Surges 17.47% In 17 Days, Marking One Of Its Longest Winning Streaks—Analysts Say There's Still Room For Double-Digit Growth For Mark Zuc...

benzingabenzinga.com
3 hours ago

This Is My Backup Plan in Case Social Security Cuts Benefits

retireretire.ly
3 hours ago

Earnings Scheduled For February 12, 2025

benzingabenzinga.com
3 hours ago

Biogen Gears Up For Q4 Print; Here Are The Recent Forecast Changes From Wall Street's Most Accurate Analysts

benzingabenzinga.com
3 hours ago

MKBHD Joins Guessing Game After Rivian Teases 'Mirage' Event For Feb. 19: What's Going On?

benzingabenzinga.com
4 hours ago

Mohamed El-Erian Says Trump's 'Uncooperative' Tariff Play Can Benefit America, But Could Lead To 'Welfare Losses' In Long-Term

benzingabenzinga.com

Will It Be Easier to Buy a Home After the Federal Reserve Cut Interest Rates?

A realtor showing a smiling couple a new home.

Image source: Getty Images

The Federal Reserve recently cut its benchmark interest rate for the first time since March 2020, when an emergency cut was enacted at the onset of the COVID-19 pandemic. As anyone who has tried to buy a house, car, or pretty much anything else requiring financing can tell you, high interest rates make it much more expensive to borrow money.

So, with the Fed finally cutting interest rates, many would-be home buyers are optimistic that we’ll finally get some relief. While the days of 3% mortgage rates aren’t likely to return anytime soon, here’s a rundown of where mortgage affordability stands now and what could come next.

Are you in the market for a home? Check your rates with our top mortgage lenders right now.

Affording a home has become much easier

Before we go any further, it’s important to point out that buying a home for the first time has become far more affordable over the past year or so, even though home prices have not come down.

That’s because 30-year mortgage rates have fallen significantly from a high of 7.90% in late 2023 to 6.14%, according to the latest data from the Mortgage Bankers Association. Here’s what this means for would-be home buyers.

Let’s say that you want to purchase a $400,000 home with 20% down. You’ll need to obtain a $320,000 mortgage. At a 7.90% interest rate, you’d have a monthly principal and interest payment of $2,325, before taxes and insurance. However, with a 6.14% interest rate on a 30-year mortgage, your principal and interest payment would be $1,948 per month for the same home at the same price.

In other words, if you buy a $400,000 home today and receive the average interest rate, you’ll save $377 per month, $4,524 per year, and more than $135,000 in interest over the life of a 30-year mortgage. That difference in monthly payment can have a big impact on a family’s ability to afford a home.

Will mortgage rates continue to fall?

Unfortunately, there’s no way to predict future mortgage rates with accuracy. And it’s worth noting that a big reason mortgage rates have fallen so much in the past year is because of the anticipation of rate cuts.

With that in mind, here’s what we know so far.

First, the Fed is widely expected to continue to lower interest rates for at least the next couple of years. According to the economic projections of the policymakers themselves, the median expectation is for an additional half percentage point of rate cuts this year, another full percentage point next year, and yet another half percentage point in 2026.

While this would leave benchmark rates significantly higher than they were prior to 2022, it’s fair to say that if the Fed’s rate cuts proceed as expected, mortgage rates are likely to trend downward as well.

As one example, Fannie Mae predicts the average 30-year mortgage rate will fall to 5.7% by the end of 2025. The Mortgage Bankers Association sees a similar path, with a 2025 year-end estimate of 5.8%.

The bottom line

Of course, keep in mind that these are just estimates and projections, and nobody knows for sure what’s going to happen. After all, when mortgage rates were hovering around 3% at the start of 2022, how many experts do you think predicted we’d see rates more than double by the end of that year?

With that in mind, if the latest rate-cutting expectations turn into reality, it’s likely that getting a mortgage will be even cheaper in 2025. However, that doesn’t say anything about home prices, which have more to do with supply-and-demand dynamics than with the Fed’s rate cuts.

Alert: highest cash back card we’ve seen now has 0% intro APR into 2026

This credit card is not just good – it’s so exceptional that our experts use it personally. It features a 0% intro APR for 15 months, a cash back rate of up to 5%, and all somehow for no annual fee!

Click here to read our full review for free and apply in just 2 minutes.

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

Related Posts

So you have $100,000 and you want to build it into $1 million by retirement. That’s great! Even if you have less — perhaps a

Okay, folks. It’s time to get serious about Social Security. I don’t like to be the person who sounds alarms and causes unnecessary panic. But

Image source: Getty Images The best credit cards have a lot of perks — cash back, travel rewards, purchase protection, and more. But what happens

Social Security benefits for spouses are a common source of confusion. MassMutual reports that 25% of surveyed adults near retirement age were unaware that spouses