However, the unprecedented rates were largely dependent on the Federal Reserve's COVID-era accommodative policies. The average 30-year fixed mortgage rate fell to 2.98%, mortgage finance giant Freddie Mac reported Thursday, its lowest level in nearly 50 years of record keeping. It's the third consecutive week and the seventh time this year that America's most popular mortgage loan rates have reached a new low. The 30-year fixed-rate mortgage began the decade at about 7.3 percent in 1971, according to Freddie Mac.
By the end of 1979, at a time of rising inflation, that rate rose to 12.9%. While inflation doesn't directly influence mortgage rates, if it increases too quickly and salaries don't keep up, borrowers have less purchasing power overall. With rising rates, more homeowners and buyers need to calculate what makes the most sense. 15-year fixed mortgage rates are generally lower, meaning you pay less interest over the life of the loan.
The Federal Reserve combated inflation by raising the federal funds rate, a one-day benchmark rate that banks charge each other. During the height of the pandemic, 15-year mortgages saw a certain revival, as low interest rates made them affordable to more borrowers than ever before. It's generally a good idea to refinance your 30-year fixed mortgage and convert it to a new loan if you can get a lower interest rate, lower your monthly payment, or otherwise improve your financial situation. Fixed-rate mortgages are the most common type of loan because a stable interest rate means predictable monthly payments over the life of the loan.
If you can, consider refinancing a 30-year mortgage and converting it into a shorter loan, which will avoid lengthening the total repayment period and helping you save on interest. Everything from housing demand, inflation and the overall health of the economy can influence mortgage rates and refinancing rates. While every lender has different standards, having a down payment of at least 20% and a credit score of 700 to 740 will generally allow you to get the lowest mortgage rate. When evaluating current mortgage rates, it's important to analyze them from a historical perspective.
The following interest rate chart is updated daily to provide you with the most current purchase rates when choosing a home loan. With mortgage rates rising, it might make less financial sense to try to refinance at a lower rate. That can be great when mortgage rates are low, but if rates on new loans go up, so will yours and your payments. In general, a borrower with a higher credit score, stable income, and a substantial down payment qualifies for the lowest rates.
Bankrate's mortgage amortization calculator shows how even a 0.1 percent difference in your rate can translate into thousands of dollars you might have to pay over the life of the loan.