Average mortgage rates are on the rise as of May 12, 2025, with a notable increase in purchase rates over the past week. Recent data from the National Association of Realtors reveals a 5.9% drop in sales of existing homes, including single-family homes, condos, and co-ops, in March to a seasonally adjusted annual rate of 4.02 million. Sales have slowed by 2.4% compared to a year ago. Lawrence Yun, the chief economist at NAR, attributes the sluggish market activity to high mortgage rates, leading to affordability challenges. This has resulted in low residential housing mobility levels, which could potentially impact economic mobility.
For those looking to enter the housing market during this busy spring homebuying season, now is the time to begin exploring mortgage options, obtaining loan quotes, and getting prequalified or preapproved to determine your affordability. The current average rate for a 30-year fixed mortgage is 6.85% for purchase and 6.92% for refinance, marking a slight increase from the previous week. Similarly, rates for a 15-year fixed mortgage are at 6.05% for purchase and 6.25% for refinance.
Mortgage rates are influenced by various factors such as inflation rates, economic conditions, housing market trends, and the Federal Reserve’s interest rate policies. Lenders also take into account your credit score, down payment amount, property details, and loan terms. Given the daily fluctuations in rates, it is advisable to secure a favorable rate when you are comfortable with the terms of your mortgage.
Freddie Mac’s latest weekly Prime Mortgage Market Survey indicates stable rates, with a 30-year fixed-rate mortgage averaging 6.76% and a 15-year fixed-rate mortgage at 5.89%. These rates are lower compared to the previous year, contributing to an increase in purchase applications. Chief economist Sam Khater notes that rates have remained steady, leading to continued growth in purchase activity.
Weekly surveys are conducted every Thursday at noon ET to gather data on four key factors that influence mortgage rates. Even a small difference of half a percentage point in your interest rate can lead to significant savings monthly and over the life of your mortgage. Your final mortgage rate is determined by the specific mortgage product you’re considering, the initial payments you’re prepared to make, and your overall financial well-being.
Your credit score plays a crucial role in securing favorable mortgage rates. Understanding your credit score enables you to identify lenders likely to approve your application and select a mortgage that aligns with your financial situation. While the best rates are typically reserved for those with good to excellent credit scores (usually a minimum FICO score of 670), even individuals with fair credit may find competitive mortgage offers.
The amount you put down as a down payment can impact your interest rate significantly. Investing at least 20% of your home’s purchase price upfront can lead to a lower interest rate and eliminate the need for mortgage insurance, reducing your overall expenses.
Loan term choices, such as 30-year, 20-year, 15-year, and 10-year mortgages, also influence interest rates. Shorter loan terms generally come with lower rates but higher monthly payments, while longer terms offer lower monthly payments but higher total interest costs over the loan’s duration.
When selecting a mortgage, you’ll encounter fixed-rate and variable-rate options. Fixed-rate mortgages maintain a consistent interest rate throughout the loan term, whereas adjustable-rate mortgages (ARMs) start with a fixed rate that later adjusts based on market conditions. Your choice between these depends on your financial objectives and risk tolerance.
Understanding the distinction between prequalification and preapproval is essential in the homebuying process. Prequalification provides a preliminary estimate of your borrowing capacity based on basic information, while preapproval involves a detailed assessment of your finances to determine the exact loan amount a lender is willing to offer.
Keep abreast of changes in mortgage rates and the factors influencing them. Lenders monitor the Federal Reserve’s benchmark federal funds target interest rate, which impacts various financial products, including mortgages. While mortgage rates are not directly tied to the Fed rate, they are influenced by similar factors considered by the Federal Reserve, such as inflation.
Following a series of interest rate hikes by the Federal Reserve to address escalating inflation levels post-pandemic, mortgage rates are expected to trend in alignment with the Fed’s decisions. Stay informed about market developments and their implications on mortgage rates to make informed decisions regarding your home financing.
On May 7, 2025, the Federal Reserve held its federal funds target interest rate steady at 4.25% to 4.50% for the third time in 2025, following rate cuts in 2024. The Fed’s decision was based on maintaining “maximum employment” and controlling inflation at 2%. The Fed acknowledged stable unemployment rates and solid labor market conditions, though economic uncertainty has increased.
Looking ahead to the June 17–18, 2025 policy meeting, it is uncertain whether the Fed will make further rate adjustments. Market expectations currently suggest a high probability of rates remaining unchanged. Economists are monitoring inflation and labor data closely, especially given the recent trends showing inflation easing and job growth exceeding expectations.
In a press conference following the May meeting, Federal Reserve Chair Jerome Powell emphasized the Fed’s cautious approach to rate cuts, recognizing the need to evaluate incoming data and economic conditions before making any decisions. Powell also addressed concerns about the impact of trade policies on inflation, highlighting the importance of monitoring developments in that area.
Powell is advocating against “preemptive cuts,” stating that it is necessary to wait for more data to determine the appropriate response. The Federal Reserve, led by Powell, will announce its rate decision following a meeting on Wednesday, June 18, 2025, at 2 p.m. ET. For more insights on the upcoming Federal Reserve meeting, its implications on personal finances, and related topics, explore additional articles in our mortgage and homebuying series. Learn about different types of mortgage loans, refinancing options, mortgage rate locks, and frequently asked questions regarding mortgage rates. Discover more resources in our personal finance guides to assist you in managing your budget and financial objectives. Additionally, find out about mortgage lenders, refinancing processes, homebuyer assistance eligibility, and adjustable-rate mortgages. While negotiating mortgage rates may not be common practice, consider discussing cost-saving options with lenders, such as mortgage points, when comparing different loan offers.
Are you looking to save money on your mortgage? You may be able to reduce your interest rate by purchasing points, which can lower your rate by approximately 0.25% per point, depending on your lender and loan terms. Find out more in our guide on securing the best mortgage rates.
What happens to your mortgage when you pass away? Unlike other debts that are typically settled through your estate, mortgages are not easily transferable. This means that the property title can only be transferred once the mortgage is paid off in full. Those who are listed on the loan are the ones responsible for the mortgage debt. Learn more about what happens to your mortgage after your passing.
If you already own a home, you may be able to borrow against your home’s equity to cover significant or unexpected expenses. Whether you need funds for home improvements, debt consolidation, or emergencies, leveraging your home’s value can provide access to lower interest rates without the need to refinance your existing mortgage. To qualify, you generally need a good credit score and sufficient equity in your home. Discover how to access your home’s equity as interest rates decrease.
Please note that the rates mentioned in this article are accurate as of Monday, May 12, 2025, at 6 a.m. ET. Rates and offers may vary based on location and are subject to change.
References:
– Mortgage Industry Insights, Bankrate
– Primary Mortgage Market Survey, Freddie Mac
– Employment Situation Summary, U.S. Bureau of Labor and Statistics
– Consumer Price Index Summary, U.S. Bureau of Labor and Statistics
– Producer Price Index News Release Summary, U.S. Bureau of Labor and Statistics
– CME FedWatch Tool, CME Group
