A “good” mortgage rate is different for everyone. In today's market, a good mortgage interest rate can fall in the high-6% range, depending on several factors, such as the type of mortgage, loan term, and individual financial circumstances.
Lawrence Yun, chief economist at the National Association of Realtors, even told CNBC in 2023 that he doesn't think mortgage rates will reach the 3% range again in his lifetime.
Most mortgage rates in the USA are set from the 10-year long bond, others are set from LIBOR and some are set from Wall Street Prime. The short answer is that a fixed rate mortgage at 4% is excellent for those with very good credit as well as being able to meet the other criteria to qualify for a top tier mortgage.
To afford a $400,000 house, you typically need an annual income between $100,000 to $125,000, which translates to a gross monthly income of approximately $8,333 to $10,417.
At its February 2024 meeting, the Reserve Bank Board decided to leave the cash rate target unchanged at 4.35 per cent. This decision supports progress of inflation to the midpoint of the 2–3 per cent target range within a reasonable timeframe and continued moderate growth in employment.
Michael Zuber, author of One Rental at a Time and former tech worker turned real estate investor, told Fortune that a 30-year fixed mortgage at a rate of 3% is without question one of the best assets most homeowners will ever have.
The lowest average mortgage rates on record came about when the Federal Reserve lowered the federal funds rate in 2020 and 2021 in response to the pandemic. As a result, the weekly average 30-year, fixed-rate mortgage fell to 2.65%, while the average 15-year, fixed-rate mortgage sunk to 2.10%.
Mortgage rates have tended to fall in response to recent recessions.
However, without a major downturn or global catastrophe, it's highly unlikely that mortgage rates will drop to their 2020-21 levels. In fact, many economists and housing market experts hope they don't. In the long term, mortgage rates may stabilize between 5.5% and 6%, which is a historically normal range.
The bottom line. Predicting exactly when mortgage rates will hit 5% is difficult. It could happen by late 2025, but market conditions could speed up or delay this timeline. "Some consumers feel rates will drop in the next two to four months [but] that may never happen," says Rathbun.
The 28/36 rule
It suggests limiting your mortgage costs to 28% of your gross monthly income and keeping your total debt payments, including your mortgage, car loans, student loans, credit card debt and any other debts, below 36%.
There are some differences around how the various data elements on a credit report factor into the score calculations. Although credit scoring models vary, generally, credit scores from 660 to 724 are considered good; 725 to 759 are considered very good; and 760 and up are considered excellent.
More than three-quarters of homeowners — 78.7 percent — have a mortgage rate below 5 percent, while nearly 6 in 10 — 59.4 percent — have a mortgage below 4 percent. Just 22.6 percent have a mortgage rate below 3 percent, according to Redfin.
Key Takeaways. The money you save from not paying off your mortgage early can give you more financial flexibility. Investing extra funds can potentially earn higher returns than you would save on mortgage interest. With extra cash flow, you can work toward other financial goals, such as saving for retirement.
This can be a great option for those who are struggling to save up for a larger deposit, especially with the current high property prices. However, it's important to keep in mind that even with a 90% LTV mortgage, a 10% deposit can still be a significant amount of money.
What is the highest credit score possible? To start off: No, it's not possible to have a 900 credit score in the United States. In some countries that use other models, like Canada, people could have a score of 900. The current scoring models in the U.S. have a maximum of 850.
Applying the 28/36 rule, a $130,000 annual earner should keep housing costs below $3,033. However, there are many other factors besides just your income that shape how much house you can comfortably afford.
The Mortgage Bankers Association (MBA) in its 2025 finance forecast indicates that mortgage rates will gradually slide from 6.6% at the beginning of 2025 to 6.3% through 2026. The National Association of Home Builders is forecasting 6.12% in 2025 and 5.71% in 2026.
Current mortgage interest rates in California. As of Sunday, January 12, 2025, current interest rates in California are 7.33% for a 30-year fixed mortgage and 6.61% for a 15-year fixed mortgage. This aligns with current national mortgage rate trends.
The National Association of Home Builders expects the 30-year mortgage rate to decrease to around 6.5% by the end of 2024 and fall below 6% by the end of 2025, according to the group's latest outlook.