Average mortgage rates showed small changes on Wednesday, May 7, 2025, following the Federal Reserve’s third policy session of the year. The Fed is anticipated to announce maintaining the federal funds target rate for the third time this year. Costs for significant loans such as mortgages have stayed high, with an increase of over 65 basis points since last September. This rise followed the Fed’s consecutive rate cuts, reminding us that mortgage rates are influenced by various factors like inflation, employment, the bond market, and the overall economy, which includes ongoing uncertainty about the U.S. economy and trade policies. For those considering a new home or refinancing, the busy spring season presents an opportunity to secure the best available rates. According to Bankrate’s latest data, the average interest rate for a 30-year fixed mortgage is 6.83% for purchase and 6.89% for refinance, a slight increase from the prior week. Rates for a 15-year fixed mortgage average 6.02% for purchase and 6.21% for refinance. The average rate for a 30-year fixed jumbo mortgage stands at 6.85%.
Mortgage rates are influenced by inflation, economic conditions, housing market trends, and the Federal Reserve’s target interest rate, along with personal credit score, down payment amount, property details, and loan terms. Given the daily rate fluctuations, it’s advisable to secure a mortgage rate when you are satisfied with the loan terms. Freddie Mac’s weekly report shows a decline in rates, with a 6.76% average for a 30-year fixed-rate mortgage and a 5.92% average for a 15-year mortgage. Freddie Mac updates its data weekly on Thursdays.
Even a slight half-percentage point difference in your interest rate can lead to significant savings of hundreds of dollars monthly and thousands over the life of your mortgage. The rate you are offered depends on factors such as the mortgage type you’re interested in, upfront payments, and your overall financial health. Your credit score plays a crucial role in determining the lenders you can approach and the type of mortgage suitable for your income and lifestyle. Borrowers with good to excellent credit scores, typically at least 670 FICO, secure the best mortgage rates, although fair credit may still qualify for decent rates.
Moreover, your down payment amount influences your interest rate, with a higher upfront payment yielding better rates and potentially avoiding mortgage insurance costs. Loan terms also impact your interest rate, as shorter terms usually offer lower rates but higher monthly payments, while longer terms can result in lower monthly payments but higher total interest payments over the loan’s life.
Understanding the type of interest rate, whether fixed or variable, is also crucial. Fixed-rate mortgages maintain a consistent interest rate throughout the loan term, whereas adjustable-rate mortgages (ARMs) start with a lower fixed rate for a specified period before transitioning to a variable rate based on market conditions. Your choice between these rates should align with your financial goals and risk tolerance.
Additionally, distinguishing between prequalification and preapproval processes is essential when determining your affordability for a home. Prequalification provides a basic estimate based on preliminary information, while preapproval involves a thorough assessment of your finances for a more accurate loan offer.
Monitoring mortgage rates is vital as they are influenced by the federal funds target interest rate set by the Federal Reserve. Recent adjustments by the Fed have impacted various financial products, including mortgage rates, as they respond to factors like inflation. Staying informed about these fluctuations can help you make informed decisions in your homebuying journey.
March 19, 2025: Fed Holds Interest Rate Steady
During its second rate-setting policy meeting of the year on March 19, 2025, the Federal Reserve decided to keep the federal funds target interest rate unchanged within the range of 4.25% to 4.50%. This marks the second occasion the Fed has opted to pause rate adjustments following three consecutive cuts in September, November, and December, which lowered the rate by a full percentage point. The central bank’s focus remains on stabilizing inflation around a 2% target.
In its post-meeting statement, the Federal Reserve highlighted its commitment to achieving “maximum employment” and maintaining a 2% inflation rate. The statement noted that the unemployment rate had remained low in recent months, with a strong labor market, albeit amid increased economic uncertainty.
Looking ahead, the Fed indicated that any further adjustments to interest rates would be carefully considered based on incoming data, the evolving economic outlook, and risk factors. Economic projections released by the Fed suggest a potential for two quarter-point cuts in 2025, reflecting concerns over slower growth and rising inflation.
Next Fed Policy Meeting: May 6–7, 2025
The Federal Reserve is anticipated to maintain the Fed rate at 4.25% to 4.50% following its two-day policy meeting that concludes today. Market expectations, as indicated by the CME FedWatch Tool, suggest a more than 95% likelihood of rates remaining unchanged.
Economists are closely monitoring inflation and labor market reports to gauge the timing of potential future rate adjustments. Recent data has shown a shift in inflation trends, with rates stabilizing between 2.5% and 4% since May 2023, following a peak of 9.1% in June 2022.
Recent job figures from the Bureau of Labor Statistics revealed an addition of 177,000 jobs to payrolls in April, surpassing expectations but slightly lower than the revised figures from March. Unemployment held steady at 4.2% during this period.
Inflation data released in April indicated a cooling trend, with the annual rate easing to 2.4% in March, lower than previous forecasts. Producer price index figures also showed a decline in wholesale prices, contributing to signs of moderating inflation.
Federal Reserve Chair Jerome Powell acknowledged the uncertainties posed by trade developments and tariffs, stating that the Fed would await further clarity before making any policy adjustments. The Fed’s rate-setting panel is scheduled to announce its decision on Wednesday, May 7, 2025, at 2 p.m.
Explore further: When is the next Federal Reserve meeting, what to anticipate, and how it can impact your financial situation.
More articles in our series on mortgages and homebuying include a guide on shopping for a mortgage in 2025, an overview of popular mortgage loans like Conventional, FHA, VA, and jumbo loans, advice on when to refinance your mortgage, the significance of a 1% rate change on your mortgage, understanding mortgage rate locks, and how to transition from an adjustable-rate mortgage (ARM) to a fixed-rate one.
Additionally, discover answers to common questions about mortgage rates and gain insights on selecting the best mortgage for your budget and financial objectives. Check out our library of personal finance guides to help you save, earn, and grow your wealth.
Wondering about mortgage lenders? They are financial institutions that provide loans to homebuyers. Unlike loan servicers who handle day-to-day loan operations, lenders facilitate the loan process and manage borrower communications.
Curious about mortgage refinancing? It involves switching your existing mortgage to a new lender for better terms and rates. The new lender pays off your old mortgage, and you begin making payments to them. Learn more about the refinancing process timing in our comprehensive guide.
If you’ve previously owned a home, you may still qualify for homebuyer assistance programs. Even if you’re not a first-time buyer, you could be eligible for assistance if you or your spouse hasn’t owned a primary residence in the last three years. Discover potential programs in our guide to homebuyer assistance.
Have questions about adjustable-rate mortgages (ARMs)? An ARM features a variable interest rate, unlike a fixed-rate mortgage. The rate remains fixed for an initial period before adjusting periodically. Learn about converting your ARM to a fixed-rate mortgage in our refinancing guide.
Interested in negotiating your mortgage rate? While direct negotiation may be limited, explore cost-saving options like mortgage points, which can lower your interest rate in exchange for upfront fees paid to the lender. Find out more about securing the lowest mortgage rate in our guide.
Lastly, understand what happens to your mortgage after your passing. Unlike other debts, how your home’s mortgage is handled differs, and it’s essential to be informed on this aspect.
Before your assets can be passed on to your heirs, any debts must be settled through your estate. Most mortgages cannot be transferred, so the property title can only be transferred once the home is fully paid off. Only those who are listed on the loan are responsible for the mortgage. If you are looking to access cash for home improvements, debt repayment, or emergencies, borrowing against your home’s equity can be a viable option. This allows you to benefit from lower rates without refinancing and without losing your current low-rate mortgage. To qualify, you generally need a good credit score and sufficient equity in your home. Keep an eye on fluctuating rates to maximize your benefits. Note that rates mentioned are accurate as of May 7, 2025, and may vary based on location and market conditions.
