Mortgage Rates Fell to 7.24%, Their Lowest Level This Month: What It Means for Your Monthly Payment

Rates slipped for a second week, but borrowing for a home still costs far more than it did a year ago.

How much did mortgage rates fall this week?

The average 30-year fixed mortgage rate fell to 7.24% this week, down from 7.32% last week, according to Freddie Mac's survey released Thursday, Oct. 29. That is the lowest average this month, but it is still well above the 6.17% average of a year ago.

The weekly numbers come from Freddie Mac's Primary Mortgage Market Survey, which the company published at noon Eastern time. The average 15-year fixed rate also dropped, to 6.60% from 6.68% a week earlier. A year ago, the 15-year averaged 5.41%.

"The average 30-year fixed-rate mortgage declined again this week, reaching its lowest level this month and modestly boosting purchasing power for prospective buyers," Sam Khater, Freddie Mac's chief economist, said in the release.

That word "modestly" is worth holding on to. An 8-hundredths-of-a-point drop is real money over 30 years, but it does not change the basic math of buying a home in a big way. The bigger story is the distance from a year ago.

Where these numbers come from

Freddie Mac buys home loans from lenders across the country, and its weekly survey is one of the most widely quoted measures of mortgage rates, so it helps to know what it measures.

According to Freddie Mac's survey page, the averages are built from thousands of loan applications that lenders across the country submit to Freddie Mac. Each week's figure covers applications from 12:00 a.m. Eastern on the prior Thursday through 11:59 p.m. Eastern on Wednesday. So this week's 7.24% reflects rates offered from Thursday, Oct. 22, through Wednesday, Oct. 28.

The survey focuses on a specific kind of borrower: someone taking out a conventional, conforming, fully amortizing loan to buy a home, putting 20% down and holding excellent credit. If your credit score is lower, your down payment is smaller or you want a jumbo loan, the rate you are offered can be noticeably different. Freddie Mac also does not publish the points and fees behind the average, so two quotes with the same rate can carry different upfront costs.

What this means for your wallet

Here is how the rates translate into a monthly principal-and-interest payment. These figures leave out property taxes, homeowners insurance and any mortgage insurance, which can add hundreds of dollars a month.

On a $400,000 loan over 30 years:

• At this week's 7.24%, the payment is about $2,726 a month.
• At last week's 7.32%, it was about $2,748, so this week's drop saves roughly $22 a month.
• At a year-ago rate of 6.17%, it would be about $2,442, or about $284 a month less than today.

Over the full 30 years, a borrower at 7.24% would pay about $581,000 in interest on that $400,000 loan, compared with about $479,000 at 6.17%. That difference of roughly $102,000 is why a single percentage point matters so much.

A 15-year loan changes the trade-off. At 6.60%, the payment on the same $400,000 jumps to about $3,506 a month, roughly $780 more than the 30-year payment. In exchange, total interest falls to about $231,000. Whether that swap makes sense depends on how much room your budget has every month, not just on the rate.

If you are house hunting, a small weekly dip like this one may slightly raise the price you can afford at the same payment. Our guide to how much house you can afford walks through how lenders look at your income and debts, which often matters more than a tenth of a point.

If you already have a mortgage, the math cuts the other way. Homeowners who locked in a rate in the 6% range or lower may find little benefit in refinancing at today's averages, while some with rates well above 7.5% may want to watch the trend more closely. Our explainer on when refinancing can make sense covers the break-even math, including closing costs.

Why rates are moving now

Mortgage rates do not follow the Federal Reserve's decisions one-for-one. They tend to track longer-term borrowing costs in the bond market, along with how much risk lenders see. That is why rates can drift up or down even in weeks when the Fed leaves its own benchmark rate unchanged.

This week's dip also extends a short run of declines. In mid-October, Freddie Mac's average stood at 7.40%, and buyers were pulling back, as we noted when mortgage applications fell even as rates dipped. The average then slipped to 7.32% on Oct. 22 and to 7.24% this week, two declines in a row, though no one can say whether that trend will continue.

For buyers, a practical step is to compare written loan estimates from several lenders on the same day, since the weekly average is only a starting point. Small differences in the rate, points and lender fees can add up to more than this week's drop.