Average mortgage rates have inched higher as of Tuesday, May 6, 2025, coinciding with the Federal Reserve’s third two-day policy session of the year. The Fed is widely expected to maintain the federal funds target rate, with traders predicting rates to remain between 4.25% and 4.50%. While this may not lead to lower mortgage rates immediately, it’s important to note that mortgage rates are influenced by various economic factors, not solely by the Fed rate. Housing authorities anticipate rates to gradually move towards 6.2% by the end of the year.
If you are financially prepared, now is a good time to start exploring mortgage lenders and comparing quotes across different types of home loans. Consider seeking preapproval to enhance your position in the competitive market, especially during the peak homebuying season in spring and summer.
Current average rates for mortgage loans include 6.83% for a 30-year fixed-rate purchase and 6.93% for a refinance, as per the latest data from Bankrate. Rates for a 15-year mortgage are at an average of 6.01% for purchase and 6.28% for refinance. Additionally, the average rate for a 30-year fixed jumbo mortgage is 6.91%.
Mortgage rates are influenced by factors like inflation, economic conditions, housing market trends, and the Federal Reserve’s interest rate policies. Lenders also consider individual factors such as credit scores, down payment amounts, the property in question, and the loan terms. Due to the fluctuating nature of rates, it’s advisable to lock in a rate when you are satisfied with your loan conditions.
For more in-depth guidance on mortgage shopping and updates on rates, refer to resources like Freddie Mac’s weekly mortgage report, which shows a decline in rates compared to both the previous week and the previous year.
Weekly on Thursdays at noon ET, the Prime Mortgage Market Survey releases data on the top factors influencing your mortgage rate. Even a slight half-percentage difference in your interest rate can lead to significant savings monthly and over the life of your mortgage. The ultimate mortgage rate you receive is influenced by the specific mortgage you are interested in, the upfront payments you are willing to make, and your overall financial well-being.
Key factors impacting your mortgage rate include your credit score, which determines the likelihood of lender approval and the type of mortgage suitable for your financial situation. A credit score of at least 670 typically secures the best rates, though decent rates can still be found with fair credit. Additionally, a higher down payment, preferably 20% of the home’s purchase price, can lead to a lower interest rate and the avoidance of mortgage insurance, reducing your overall cost.
Loan term selection is vital, with shorter terms usually offering lower interest rates but higher monthly payments. Conversely, longer terms may result in lower monthly payments at the expense of higher total interest payments. Mortgage rates can be fixed or variable, each with its pros and cons based on your financial objectives and risk tolerance.
Understanding the difference between prequalification and preapproval is essential in determining your homebuying budget. Prequalification provides a basic estimate of your borrowing capacity, while preapproval involves a more in-depth financial review to offer a precise loan amount. Delve into the nuances of these steps in your homebuying journey with our detailed guide.
Stay informed on mortgage rate fluctuations, influenced by factors such as the Federal Reserve’s benchmark federal funds target interest rate. While mortgage rates are not directly tied to the Fed rate, they are impacted by similar economic indicators, particularly inflation. As the Fed rate rises, mortgage rates often follow suit.
Following a series of rate hikes by the Federal Reserve to combat inflation post-pandemic, it is crucial to monitor market developments to make informed decisions regarding your mortgage.
The Federal Reserve made a highly anticipated decision to cut its federal funds target interest rate by half a percentage point on September 18, followed by two additional quarter-point cuts in November and December. On March 19, 2025, the Fed announced a pause on rate cuts for the second time, keeping the federal funds target interest rate steady at a range of 4.25% to 4.50% after its policy meeting. This marks the second time the Fed has halted rate changes since the consecutive cuts in the previous months. The Fed’s focus remains on adjusting the inflation rate towards a 2% target.
In its post-meeting statement, the Federal Reserve mentioned its commitment to achieving “maximum employment” and maintaining inflation at 2%. The statement acknowledged the stable unemployment rate and solid labor market conditions but also noted increased uncertainty in the economic outlook. The Fed stated it would carefully assess incoming data, the evolving outlook, and the balance of risks in determining future adjustments.
Economic projections indicate expectations for two quarter-point rate cuts in 2025, reflecting concerns about slower growth and higher inflation. The upcoming policy meeting on May 6–7, 2025, is expected to maintain the Fed rate at 4.25% to 4.50%, with market expectations largely predicting no changes. Analysts are closely monitoring inflation and labor reports to anticipate the timing of potential future rate adjustments.
Recent data shows a decrease in the annual inflation rate to 2.4% in March, along with declining producer prices and stable unemployment figures. Federal Reserve Chair Jerome Powell addressed the impact of President Trump’s tariffs on future policy decisions, emphasizing the need for clarity before making any adjustments.
The Federal Reserve will announce a rate decision at the conclusion of its meeting tomorrow on Wednesday, May 7, 2025, at 2 p.m. ET. Discover more: Find out when the next Federal Reserve meeting will take place, what to anticipate, and how it impacts your finances. Explore additional stories in our mortgages and homebuying series: – Guide on shopping for a mortgage in 2025 for homebuyers – Overview of popular mortgage loans for homebuyers including Conventional, FHA, VA, and jumbo loans – Advice on when to refinance your mortgage – Understanding the impact of a 1% rate change on your mortgage – Explanation of a mortgage rate lock – Steps to refinance your adjustable-rate mortgage into a fixed-rate mortgage – Answers to frequently asked questions about mortgage rates Dive deeper into these common questions about mortgages to help you choose the best option for your budget and financial goals. Check out our range of personal finance guides designed to assist you in saving money, earning money, and growing your wealth. Curious about mortgage lenders? Learn that lenders are financial institutions that lend money to homebuyers, while loan servicers handle operational tasks such as processing payments and communicating with borrowers. Wondering what refinancing a mortgage entails? Refinancing involves swapping your current mortgage for a new one with better terms and lower rates. Explore the process further in our guide on timing your refinancing. Are you a previous homeowner wondering if you can still qualify for homebuyer assistance? The IRS and HUD define a first-time homebuyer as someone who hasn’t owned a principal residence in the last three years, making you eligible for certain programs. Discover more about potential assistance programs in our homebuyer assistance guide. Interested in adjustable-rate mortgages (ARMs)? An ARM features a variable rate that adjusts after a fixed period, unlike a fixed-rate mortgage. Learn more about converting your ARM to a fixed-rate mortgage in our refinancing guide. Can you negotiate your mortgage rate? While negotiating the rate is unlikely, you can inquire about alternative cost-saving options from lenders like mortgage points, which can reduce your interest rate for an upfront fee. Find out more in our guide to securing the lowest rate on your next mortgage.
What happens to your home’s mortgage after you pass away? Your mortgage is handled differently than other debts in your estate. While most debts are typically settled before assets are distributed to heirs, mortgages are not usually transferable. This means that the property title can only be transferred after the home is paid off in full. Only those who are on the loan are responsible for the mortgage debt.
If you already own a home, you may be able to borrow against your home’s equity for large or unexpected expenses. This can be used for home improvements, paying off high-interest credit card debt, or covering emergencies. By tapping into your home’s value, you can access lower rates without needing to refinance and without losing your current low-rate mortgage. To qualify, you generally need good to excellent credit and have built up sufficient equity in your home.
Note: The rates mentioned were accurate as of Tuesday, May 6, 2025, at 6 a.m. ET. However, rates and promotional offers may vary by region and are subject to change.
Sources:
– Mortgage Industry Insights, Bankrate. Accessed May 6, 2025.
– Primary Mortgage Market Survey, Freddie Mac. Accessed May 2, 2025.
– Employment Situation Summary, U.S. Bureau of Labor and Statistics. Accessed May 5, 2025.
– Consumer Price Index Summary, U.S. Bureau of Labor and Statistics. Accessed April 11, 2025.
– Producer Price Index News Release Summary, U.S. Bureau of Labor and Statistics. Accessed April 14, 2025.
– CME FedWatch Tool, CME Group. Accessed May 6, 2025.
