Here’s how far mortgage rates have dropped already this year

After years of high mortgage rates that left countless would-be homeowners on the sidelines, the tide is finally turning in favor of those looking to enter the housing market. This week, the Federal Reserve slashed its benchmark rate by 50 basis points, lowering it to a range of 4.75% to 5%. Mortgage rates are also sitting at a two-year low, making it easier for buyers to afford a home.

While markets initially expected just a 25-basis-point cut, the larger-than-expected Fed rate cut came after inflationary pressures eased and the job market slowed substantially. The ripple effects of this policy shift are likely to have an impact on the mortgage market over the coming days and weeks. After all, the rate cut anticipation alone helped to drive down mortgage rates in the days leading up to the announcement. 

Many experts believe that additional Fed rate cuts could also be on the horizon later this year or early next year. Whether or not those come to fruition, though, the reality is that the mortgage rate landscape has already improved significantly from where it stood earlier in 2024. So, how far have mortgage rates dropped already this year?

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Here’s how far mortgage rates have dropped already this year

Mortgage rates have experienced significant fluctuations in 2024, but the overall trend has been a marked decrease from their peak earlier this year. As of this week, the average 30-year fixed mortgage rate sits at 6.15%, its lowest point in two years (since September 2022). This marks a notable drop from the start of the year when rates were considerably higher. 

In the first week of January, mortgage rates averaged around 6.62%, already elevated compared to historical norms. By late March, they had surged to 6.94%, and by the first week of May, they had reached their peak for the year at 7.22% — up by about 0.6% from the start of 2024.

A downward trend then followed and continued throughout the summer and into the fall. By the first week of July, mortgage rates had eased back to 6.94%. And as the economic outlook has improved over the last two months, mortgage rates have continued to decline, ultimately dropping to the current level of 6.15%. So, from January 1 until now, mortgage rates have declined by a total of about 0.5%.

That half-percentage-point drop may not seem substantial, but even a slight rate drop could mean the difference between affording a home and being priced out of the market. And while today’s rates may be higher than the historically low rates seen during the pandemic years, they still represent a significant improvement from the highs earlier this year. 

It’s also worth noting that mortgage rates will fluctuate regularly in any rate environment, as there are a wide range of factors that impact them. Those fluctuations have a direct impact on monthly mortgage payments, though. To put these rate shifts into perspective, let’s consider how they would impact the monthly payments on a $300,000 home loan with a 30-year fixed-rate mortgage:

• January (6.62%): Monthly payment of $1,919.94
• Late March (6.94%): Monthly payment of $1,983.83
• Early May (7.22%): Monthly payment of $2,040.43
• Early July (6.94%): Monthly payment of $1,983.83
• Current (6.15%): Monthly payment of $1,827.68

The difference between the peak rate in May and the current rate translates to a monthly savings of about $213. Over the life of a 30-year loan, this amounts to a total of about $77,000 in interest savings. For many buyers, this could be the difference between renting and owning their dream home.

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Here’s how much mortgage rates could fall in the future

While the current trend in mortgage rates is encouraging, predicting how much further they could fall remains a challenge. The Fed’s recent 50-basis-point cut, along with the potential for more cuts in the coming months, could lead to even lower borrowing costs for homebuyers. 

It’s important to remember, though, that mortgage rates are influenced by a range of factors beyond just the Fed’s actions. Economic growth, inflation expectations and global financial conditions all play a role in determining where mortgage rates go next. And, any unexpected changes in the economy — such as a sudden spike in inflation — could prompt the Fed to reverse course or slow the pace of rate cuts.

The bottom line

While mortgage rates have already fallen significantly this year, their future trajectory remains uncertain. So, buyers who want to take advantage of the current environment should stay informed about economic conditions and weigh all of the factors, including their optimal timeline, budget and the potential downsides of waiting for lower rates, to determine the best time to lock in a rate. And, whether rates fall further or not, the current mortgage environment is already more favorable than it has been in recent memory, offering many buyers a renewed opportunity to achieve homeownership.