Cash News
The average 30-year fixed mortgage rate is 7.09% this week, and the 15-year fixed rate is 6.38%. These are both down from last week, following multiple consecutive weeks of rate increases.
“After a five week climb, mortgage rates ticked down following a weaker than expected jobs report,” said Freddie Mac chief economist Sam Khater in a press release.
On May 3, the Bureau of Labor Statistics’ April jobs report showed that month-over-month unemployment rates rose slightly, and the U.S. added fewer jobs in April than expected. Rising unemployment is usually good news for mortgage rates because rates tend to go down when the economy struggles.
Tomorrow, the Bureau of Labor Statistics will also release the April Consumer Price Index (CPI), which is a main measure of inflation. If inflation goes down, mortgage rates will likely follow suit.
Dig deeper: Is it a good time to buy a house?
Today’s mortgage rates
According to Freddie Mac, the national average 30-year mortgage fixed rate this week is 7.09%, down 13 basis points from the previous week. This is the first decrease after five straight weeks of 30-year rate increases.
The average 15-year fixed rate inched down too. It is 6.38%, a nine-basis-point drop from the week prior. This follows four consecutive weeks of 15-year rate increases.
30-year vs. 15-year fixed mortgage rates
As a rule of thumb, 15-year mortgage rates are lower than 30-year mortgage rates. When comparing 15- versus 30-year mortgage rates, know that the shorter term will save you money on interest in the long run. However, your monthly payments will be higher because you’re paying off the same loan amount in half the time.
For example, with a $400,000 30-year mortgage and a 7.09% rate, you’ll make a monthly payment of about $2,685 toward your mortgage principal and interest. As interest accumulates over decades, you’ll end up paying $566,755 in interest.
If you get a $400,000 15-year mortgage with a 6.38% rate, you’ll pay about $3,458 monthly toward your principal and interest. However, you’ll only pay $222,457 in interest over the years.
To play around with rates, term lengths, and more, use our free Yahoo Finance mortgage calculator and see what you would pay each month in different scenarios.
Learn more: How much money do I need to buy a house?
Fixed-rate vs. adjustable-rate mortgages
With a fixed-rate mortgage, your rate is locked in from day one. However, you will get a new rate if you refinance your mortgage.
An adjustable-rate mortgage keeps your rate the same for a set period of time. Then the rate will go up or down depending on several factors, such as the economy and the maximum amount your rate can change according to your contract. For example, with a 7/1 ARM, your rate would be locked in for the first seven years, then change every year for the remainder of your term.
Adjustable rates typically start lower than fixed rates, but once the initial rate-lock period ends, you risk your interest rate going up.
Dig deeper: Adjustable-rate vs. fixed-rate mortgage — Which should you choose?
When will mortgage rates finally drop?
In Fannie Mae’s April rate forecast, the government-sponsored enterprise said it expects 30-year fixed rates to end 2024 at 6.4%. The Mortgage Bankers Association also predicts the rate will drop to 6.4% by the end of the year. Both forecasts expect rates to end up around 6% by the end of 2025. So while rates will likely start decreasing later this year, the drop might not be as drastic as people had previously expected.
The trajectory of future mortgage rates will largely depend on the Federal Reserve’s decision on whether or not to cut the federal funds rate at its meetings throughout the year. The federal funds rate doesn’t directly impact mortgage rates, but it is a good indicator of how the economy is doing overall. So when the Fed rate drops, mortgage rates typically go down too. The next Federal Reserve meeting is in mid-June.
Learn more: What the Fed rate decision means for bank accounts, CDs, loans, and credit cards