Exciting interest rate drop is just about as exciting as watching paint dry
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Exciting interest rate drop is just about as exciting as watching paint dry
Connor with Honor - August 25, 2024** Tags: [interest rates](/-/Blog/tag/interest rates), [santa clarita valley](/-/Blog/tag/santa clarita valley), [homes for sale](/-/Blog/tag/homes for sale), [connor with honor](/-/Blog/tag/connor with honor), [top agents](/-/Blog/tag/top agents) ** 0 Comments | Add Comment
We have been told, buy the experts, interest rates are dropping soon. I have been a long time advocate of telling people never buy a home predicated on what other people are telling you about something that cannot be known for sure.
Such as the promised interest rate reductions we have been hearing rumors about since the rates jumped up several months ago.
Well - here is the current data feed breakdown regarding interest rates. I have gleaned this information from online platforms and other data sources to the best of my ability. I’ll explain after the numbers:
Average 30-year mortgage rate:
- Current rate: 6.46% (lowest level in 15 months)
- Previous week: 6.49%
- One year ago: 7.23%
- Lowest since mid-May last year, when it was 6.39%
- Average 15-year fixed-rate mortgage:
- Current rate: 5.62%
- Previous week: 5.66%
- One year ago: 6.55%
- Historical context:
- The U.S. housing market has been in a sales slump since 2022 due to rising mortgage rates.
- Last year, existing home sales fell to a nearly 30-year low.
- Average 30-year mortgage rate surged to a 23-year high of 7.79% last year.
- This year, the average 30-year mortgage rate hovered around 7%, more than double what it was three years ago.
- Recent trends:
- The average rate on a 30-year mortgage has recently dropped to around 6.5%, marking the biggest downshift in over a year.
- This decline has led to an increase in home refinancing loan applications, though home purchase loan applications have lagged.
- Market outlook:
- Mortgage rates are expected to trend lower overall this year, with potential further declines if economic conditions continue to soften.
- The Federal Reserve is expected to cut its benchmark interest rate next month for the first time in four years, contributing to this downward trend in mortgage rates.
- Existing home sales (July 2024):
- Increased by 1.3% from June to a seasonally adjusted annual rate of 3.95 million.
- This marked the end of a four-month decline in sales.
- The median U.S. home sales price rose by 4.2% from a year earlier to $422,600.
- The median sales price for July was the highest on record for the month.
- Overall market conditions:
- Home sales remain sluggish despite the slight increase.
- Home prices have increased by 51% over the past five years.
- The direction of mortgage rates and the broader economy will influence the housing market’s future.
As you can see there has been some movement. This FED rate that is typically talked about is not the “home buying mortgage” interest rate. That is something that will get impacted by the “trickle down” effect. The FED rate is the rate the banks are charged to move their money, aka your money. When they get a break - then the consumer who wants/needs to buy, refinance or take money out of the real estate they own will get a break with being able to pay a lower interest rate.
As an aside, regarding the HELOC, here is the home equity line of credit loan. Some have called to see if they can buy an investment property now or a move-up property using their home’s equity to do so. There are several options, most of which cost the seller(buyer) a lot through interest rate charges and unfriendly loan terms. (what loan is friendly - I ask you :) )
But a HELOC Is an option; here is the information about those costs that I was able to scrape from the online data:
- Current HELOC interest rate:
- The average HELOC interest rate stands at 9.37% (as of August 21, 2024).
- Monthly costs for a $75,000 HELOC:
- For a 10-year HELOC at 9.37%:
- Monthly payment: $965.15
- Total interest paid: $40,818.17
- For a 15-year HELOC at 9.37%:
- Monthly payment: $777.30
- Total interest paid: $64,913.27
- Projected HELOC costs with a 25 basis point rate decrease:
- If the HELOC rate drops by 25 basis points to 9.12%:
- For a 10-year HELOC at 9.12%:
- Monthly payment: $954.95
- Total interest paid: $39,593.51
- For a 15-year HELOC at 9.12%:
- Monthly payment: $766.06
- Total interest paid: $62,891.37
- Current Home Equity Loan interest rate:
- The average rate for a Home Equity Loan is 8.52%.
- Monthly costs for a $75,000 Home Equity Loan:
- For a 15-year loan at 8.52%:
- Monthly payment: $739.43
- Total interest paid: $58,098.15
- Projected Home Equity Loan costs with a 25 basis point rate decrease:
- If the Home Equity Loan rate drops by 25 basis points to 8.27%:
- For a 15-year loan at 8.27%:
- Monthly payment: $728.48
- Total interest paid: $56,126.07
- Key differences between HELOC and Home Equity Loan:
- HELOC:
- Allows drawing funds as needed, potentially reducing overall interest costs.
- Rates are variable and can be adjusted monthly.
- Home Equity Loan:
- Provides a lump sum upfront with a fixed interest rate.
- Rates do not automatically fall with rate decreases; refinancing is required to secure a lower rate, which incurs closing costs.
- Economic outlook:
- The Federal Reserve is expected to conduct its first rate cut of the year in September 2024, which could lower rates on HELOCs and Home Equity Loans.
- Equity statistics for the average homeowner:
- The average homeowner currently has about $200,000 in accessible home equity.
- The average total home equity for a homeowner is approximately $300,000.
Why I post daily real estate information pertaining to the market, in Santa Clarita, Los Angeles and in the areas where I am most ready. In the fast-paced world of real estate, it’s crucial to remain abreast of the latest market trends, especially when it comes to interest rates. Understanding the current state of interest rates can significantly influence decisions related to home purchases, refinancing, and leveraging home equity. Let’s take an in-depth look at the prevailing interest rate landscape and its potential impact on homeowners and prospective buyers.
Recent indicators have pointed to a positive shift in interest rates, with projections suggesting a potential decrease in the near future. However, it’s pivotal not to solely rely on speculation when making significant financial decisions. Here’s a detailed breakdown of the current interest rate data and its implications:
- Mortgage Rates Insights:
- The average 30-year mortgage rate currently stands at a competitive 6.46%, marking the lowest level observed in the past 15 months. This favorable rate presents an appealing opportunity for individuals considering home purchases or refinancing.
- Furthermore, the average 15-year fixed-rate mortgage is notably appealing at 5.62%, offering an alternative option for prospective homebuyers seeking lower interest rates and accelerated equity build-up.
- Historical Context and Market Outlook:
- The recent trajectory of mortgage rates has been influenced by the impact of rising rates on the housing market, resulting in a sales slump and a surge in mortgage rates reaching a 23-year high of 7.79% last year.
- However, recent trends have shown promising signs, with a significant downshift observed in the average rate for a 30-year mortgage to approximately 6.5%, triggering a notable increase in home refinancing loan applications. While home purchase loan applications have experienced a lag, this downward trend signals a potential opportunity for prospective buyers and existing homeowners.
- Projections indicate a further downward trend in mortgage rates, with an expectation of continued decreases should economic conditions remain favorable. The Federal Reserve’s anticipated rate cut next month is expected to contribute to this favorable trend, potentially offering relief to homeowners and homebuyers alike.
Understanding the Impact of HELOCs and Home Equity Loans:
In addition to mortgage rates, it’s crucial for homeowners to comprehend the impact of Home Equity Line of Credit (HELOC) and Home Equity Loans, particularly in leveraging home equity for financial decisions. Here’s a closer look at the current interest rate data for HELOCs and Home Equity Loans:
- Average HELOC Interest Rate:
- As of August 21, 2024, the average interest rate for HELOCs stands at 9.37%.
- HELOC and Home Equity Loan Projections:
- Projected costs reveal compelling insights for homeowners, showcasing potential changes in monthly payments and total interest paid with a 25 basis point rate decrease.
- Economic Outlook and Home Equity Statistics:
- Looking ahead, the anticipated rate cut by the Federal Reserve in September 2024 holds the potential to positively impact rates on HELOCs and Home Equity Loans, offering homeowners improved financial terms and opportunities.
- Notably, homeowners hold a significant average accessible home equity of approximately $200,000, signaling a valuable financial resource. Moreover, the average total home equity for homeowners is estimated to be around $300,000, underscoring the financial strength and stability of homeowners in the current market.
In summary, the evolving landscape of interest rates presents significant opportunities for homeowners and prospective buyers to make informed and advantageous financial decisions. As these market shifts continue to unfold, it’s essential to stay informed and seek professional guidance to leverage these trends effectively for long-term financial success.
Buying real estate, selling real estate, whether you are in Santa Clarita or Los Angeles. I ensured that I have taken the proper steps to keep my clients informed and without a worry when it comes putting the proverbial pen to paper.
I have been selling homes since 1998 and here is the “why I am worth being your realtor” article here.
Have the best week, It’s Sunday and things in the real estate landscape are moving along with some changes.
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