Current 15-year fixed mortgage rates, and how a shorter term can save you money on your loan
Updated 11:42 AM EDT, Thu October 17, 2024
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After more than two years of rising rates due to post-pandemic inflation, 15-year mortgage rates are finally on the downswing. And since rates on 15-year mortgages are typically lower than those for 30-year terms, you can potentially save tens of thousands (or even hundreds of thousands) of dollars in interest over the life of your home loan — if you can afford the higher monthly payment.
However, current 15-year mortgage rates are still more than double their 2021 lows, so finding the best available rate is key. We’ll examine today’s rates and explore how comparison shopping and improving your credit scores can help you snag a competitive APR.
Current 15-year fixed mortgage rates
The average 15-year mortgage rate was 5.41% in mid-October, according to the St. Louis Federal Reserve.
In 2021, mortgage rates were at historic lows — the average 15-year rate was just 2.10% in July of that year. But in early 2022, the Fed began increasing interest rates as a means to control pandemic-era inflation. As a result, 15-year mortgage rates increased by more than five percentage points in just over two years, reaching a 20-year high of 7.03% in October 2023.
Related >> Historical mortgage rate trends over time
But the Sept. 18, 2024 rate cut — Fed Chair Jerome Powell announced lowering the federal funds rate by half of a percentage point (or 50 basis points) — will likely stem the tide. With another cut anticipated by the end of 2024, 15-year mortgage rates are on the decline.
To provide some context for what current 15-year mortgage rates mean for your wallet, compare the interest on a $350,000 loan to be repaid over 15 years — at Oct. 2024’s rates versus their recent highs and lows.
| Monthly payment (principal and interest) | Cost of interest in first month | Cost of interest over 15 years | |
|---|---|---|---|
| Oct. 2024: 5.41% | $2,843 | $1,578 | $161,759 |
| Oct. 2023: 7.03% | $3,152 | $2,050 | $217,319 |
| July 2021: 2.10% | $2,268 | $613 | $58,318 |
First-person experience: Katherine Fan, an Austin-based homeowner and real estate investor, landed her 15-year mortgage when rates were at their lowest during the pandemic.
“I got lucky with low interest rates in the first quarter of 2020… but decided to push my luck with low rates even further by refinancing a year and a half later,” said Fan. She refinanced from a 30-year mortgage rate of 3.625% to a 15-year loan with a 2.5% rate in late 2021.
"Ultimately, I liked the idea of saving well over $100,000 by paying an extra $500 per month." — Katherine Fan
“At my refinanced rate, I’ll only pay about $50,000 more than my original home value in total interest, and my home equity has already risen far more than that,” said Fan. Rates on 15-year loans were marginally lower than on 30-year loans when she was shopping, but the biggest interest savings will come from paying off her loan in half the time.
Related >> 15-year vs. 30-year mortgage: Which is best for you?
How 15-year mortgage rates are trending
It’s impossible to know with certainty what will happen to future interest rates — beyond the fact that 15-year mortgage rates will always be lower than those of longer repayment terms — but financial experts make projections based on economic factors.
At its September 2024 meeting, the Fed announced it would cut the federal funds rate for the first time since March 2020. Central bankers at the Fed expect to lower rates again in 2024 and throughout 2025, which could translate to rates continuing to fall.
That being said, other economic factors affect mortgage rates.
“The big thing to remember is that the broader economy — things like inflation, employment data and just how confident people are feeling about spending — plays a huge role,” said Rachel Stringer, a North Carolina-based real estate agent. “If inflation stays in check, then we might see these rates stay lower. But if prices start climbing again, expect mortgage rates to go right back up.”
6 tips for scoring competitive 15-year mortgage rates
- Improve your credit scores. Your credit scores are critical to getting a good mortgage rate. If your scores are less than ideal, consider spending a few months to a year improving them before applying for a mortgage. Paying down debt and disputing errors on your credit reports can pay dividends. Start with AnnualCreditReport.com.
- Comparison shop. You may be quoted different interest rates from different lenders, so shop around and get preapproved with more than one. If you want to work with a particular lender, consider using a lower quoted rate from another lender as leverage during negotiations.
- Consider different loan types. Most people opt for conventional loans, but it’s worth asking your lender whether you may qualify for a lower interest rate using a different mortgage type.
- Increase your down payment. A larger down payment can help you land a lower interest rate. If you can’t afford a larger down payment but a lower interest rate is important to you, consider postponing your home purchase to save up. Also, look into first-time homebuyer programs via the Department of Housing and Urban Development.
- Lock in your rate. When you lock in your mortgage rate, you guarantee it won’t change before your closing date. Some lenders offer automatic rate locks for a certain period, while others charge for one. Keep in mind, however, that a rate lock could also prevent your interest rate from going down if the market changes — that is, unless your lender offers a “float-down” option.
- Buy down your rate. Discount points are a tool to buy down your interest rate in exchange for an upfront fee. Though there’s an upfront cost, you could save money over the life of your loan.
Factors influencing your 15-year mortgage rate
In addition to the macroeconomic factors that can impact 15-year mortgage rates, various real-world factors can impact your rate:
- Credit scores: The better your scores, the lower the interest rate you’ll likely get. You’ll need scores of at least 620 to qualify for a conventional loan, but you may qualify for a government-backed loan with a lower threshold. Check your credit scores via your bank or credit union or via a third-party service, including those offered by the major credit bureaus, Equifax, Experian and TransUnion.
- Location: Your interest rate may be impacted by your state of residence. The Consumer Financial Protection Bureau has an online tool to help you learn about interest rate trends in your particular state.
- Loan size: The amount you plan to borrow can impact your mortgage rates. Generally, very small or very large loans are likely to have higher interest rates, while moderately sized loans may have lower rates.
- Down payment: The higher your down payment (as a percentage of the purchase price), the lower your interest rate will be. A conventional loan requires a down payment of at least 3%, but 20% or more can help you land the best interest rate, as well as help you avoid monthly private mortgage insurance (PMI) premiums.
- Repayment term: If you’re shopping for a 15-year mortgage, you’re in luck. These shorter loans tend to have lower interest rates than mortgages with longer terms.
- Interest rate type: Adjustable-rate mortgages (ARMs) usually have lower initial interest rates than fixed-rate loans. However, the rates on these loans fluctuate, so if the macroeconomic factors discussed above cause rates to rise, your mortgage rate may climb higher than it would have been on a fixed-rate loan.
- Loan program: Whether you have a conventional conforming loan, jumbo loan, FHA loan, VA loan or USDA loan can impact your interest rate.
Pros and cons of 15-year fixed-rate mortgages
| Pros | Cons |
|---|---|
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The key advantages and disadvantages of a 15-year mortgage come down to cost. On the plus side, a 15-year loan will help you land a lower interest rate and pay considerably less in interest over the life of your loan. You’ll also be debt-free faster, freeing up a large amount of money in your budget.
But cost is also a downside through a short-term lens. You'll have significantly higher monthly payments, which could strain your budget and leave less money for savings or other expenses.
Plus, you might not qualify for the same loan size that you could on, say, a 30-year mortgage that spreads out payments over a twice-as-long period. As a result, with a 15-year term, you may have to set your sights on lower-cost properties.
Is a 15-year mortgage right for you?
A 15-year loan might be right if you can comfortably cover the increased monthly payment or you’re willing to choose a more affordable home to ensure the higher payment fits your budget. You may also choose a shorter term if you’re highly motivated to become debt-free and would prioritize paying off your mortgage above other financial goals.
But it may be smarter to prioritize debt repayment and retirement savings before opting for a 15-year mortgage, said Mason Whitehead, a branch manager with the national lender Churchill Mortgage.
"I only recommend going with a 15-year loan when the rest of your 'financial house' is in order." — Mason Whitehead
The interest savings and shortened repayment term can be attractive, but only you can decide whether a 15-year loan makes sense for your situation. If your decision is more about math than emotion, use a mortgage payment calculator to estimate what your monthly payments might look like and how they would fit within your current budget.
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Frequently asked questions (FAQs)
Mortgage rates fluctuate based on economic and market factors. In mid-October 2024, the average rate on a 15-year mortgage was 5.41%, according to the Federal Reserve Bank of St. Louis.
Mortgage rates change daily based on what’s happening in the market. Once you lock in your rate with a fixed-rate mortgage, it won’t change at all. However, if you have an adjustable-rate mortgage, your rate could change periodically — often every year.
The interest rate is the annual percentage a lender charges for your borrowed funds. The annual percentage rate (APR) represents the total annual cost of your loan, including your interest rate and any other fees or charges. Because the APR includes both interest and other expenses, it’s generally higher than the interest rate — and it’s the best barometer when comparing lender offers.
Related >> APR vs. interest rate: How to tell the difference
You can often negotiate the interest rate, as well as certain fees, on a 15-year mortgage. A lender may be especially likely to negotiate if you have an excellent credit score and have been quoted a lower interest rate from a different lender. However, not all lenders are willing to negotiate.
It may be worth refinancing to a 15-year fixed-rate mortgage if you can save money on interest, perhaps because your credit has improved since you first borrowed. However, keep in mind that you might not qualify for a better interest rate, particularly if you took out your current home loan when rates were lower.
Also, remember that by refinancing to a shorter loan term, you may end up with a higher monthly payment. Stress-test your budget before committing to higher monthly dues.
Editorial Disclaimer: Opinions expressed here are the author's alone, not those of any bank, credit card issuer, airlines, hotel chain, or other commercial entity and have not been reviewed, approved or otherwise endorsed by any of such entities.
This content is for educational purposes only and is not intended and should not be understood to constitute financial, investment, insurance or legal advice. All individuals are encouraged to seek advice from a qualified financial professional before making any financial, insurance or investment decisions.
Note: While the offers mentioned above are accurate at the time of publication, they're subject to change at any time and may have changed or may no longer be available.
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