Average mortgage rates have increased recently following the Federal Reserve’s decision to maintain benchmark interest rates between 4.25% and 4.50%. This marks the third time the Fed has paused since beginning rate cuts last September. Lenders closely monitor the Fed rate, which is influenced by economic factors affecting borrowing rates for large loans like mortgages. If you’re in the market for a home this spring season, focus on your long-term housing needs rather than short-term rate fluctuations. Start shopping for a mortgage to determine what you can afford and secure the lowest rate you qualify for.
As of May 8, 2025, the average rate for a 30-year fixed mortgage is 6.85% for purchase and 6.94% for refinance, up from the previous week. Rates for a 15-year mortgage are at 6.03% for purchase and 6.24% for refinance. The average rate for a 30-year fixed jumbo mortgage stands at 6.83%. To ensure you get the best rate, consider various loan options and factors that impact rates, such as inflation, economic conditions, and your credit score.
Freddie Mac’s weekly mortgage report shows a decline in rates, with a 30-year fixed-rate mortgage averaging 6.76% and a 15-year mortgage at 5.92%. Rates are lower compared to a year ago. It’s crucial to understand the factors influencing your mortgage rate, as even a small difference can lead to significant savings over time. Monitoring rate fluctuations and locking in a favorable rate when conditions are right can help you secure a suitable mortgage or home loan.
Understanding your financial readiness is crucial for securing the right mortgage. Consider the following key factors:
1. Credit Score: Your credit score plays a significant role in determining the mortgage rates you qualify for. Borrowers with good to excellent credit scores, typically 670 or higher, receive the most favorable rates. However, even with fair credit, you may still find decent mortgage options.
2. Down Payment: A higher down payment, ideally at least 20% of the home’s purchase price, can lead to lower interest rates and eliminate the need for mortgage insurance, reducing your overall costs.
3. Loan Term: Various loan terms are available, such as 30-year, 20-year, 15-year, and 10-year mortgages. Shorter terms usually come with lower interest rates but higher monthly payments, while longer terms offer lower monthly payments but result in higher total interest paid over the loan’s lifespan.
4. Interest Rate Type: Mortgages can have fixed or variable interest rates. Fixed-rate mortgages maintain a consistent interest rate throughout the loan term, while adjustable-rate mortgages (ARMs) start with a fixed rate that later adjusts based on market conditions. Your choice between the two depends on your financial objectives and risk tolerance.
5. Prequalification vs. Preapproval: These processes help determine your affordable house price range. Prequalification provides a basic estimate based on limited information, while preapproval involves a thorough financial review by a lender for a more accurate loan amount.
Lastly, staying informed about mortgage rate trends and how they are influenced by factors like the Federal Reserve’s interest rate decisions can help you make informed decisions when securing a mortgage.
The Federal Reserve decided to keep the federal funds target interest rate unchanged at 4.25% to 4.50% for the third consecutive time, following three cuts in 2024. The previous cuts included a significant half-point reduction in September 2024, followed by quarter-point cuts in November and December. The Fed’s decision was based on its objective to achieve maximum employment and control inflation at 2%.
In its post-meeting statement, the Federal Reserve highlighted that the unemployment rate had stabilized at a low level in recent months and that labor market conditions remained strong. However, the Fed acknowledged an increase in uncertainty surrounding the economic outlook. The Fed emphasized that it would carefully assess incoming data, the evolving economic landscape, and the balance of risks when considering further adjustments to the interest rates.
After the March meeting, the Fed updated its rate projections to anticipate only two quarter-point cuts in 2025, citing expectations of slower economic growth and higher inflation in the future.
Looking ahead to the next policy meeting scheduled for June 17–18, 2025, it is uncertain what decisions the Federal Reserve will make. Market expectations, as measured by the CME FedWatch Tool, suggest a high probability that the Fed will maintain the current interest rates. Economists are closely monitoring inflation and labor reports to gauge the timing of future rate adjustments.
Recent data revealed that employers added 177,000 jobs in April, slightly below the revised figure for March. Unemployment remained steady at 4.2%. Inflation also showed signs of easing, with the annual rate dropping to 2.4% in March. These developments have been influenced by factors such as lower energy costs and decreases in travel expenses.
Federal Reserve Chair Jerome Powell reiterated the Fed’s cautious approach to rate cuts during a post-meeting press conference in May. Powell emphasized the need to wait for clearer data before determining the appropriate monetary policy response. The rate-setting panel led by Powell will announce its decision on June 18, 2025.
For further insights on upcoming developments, stay tuned for updates on the next Federal Reserve meeting.
Discover what to expect at the upcoming Federal Reserve meeting and how it could impact your finances. Explore other articles in our mortgages and homebuying series, including a guide on shopping for a mortgage in 2025 and an overview of popular mortgage loan options like Conventional, FHA, VA, and jumbo loans. Find out when it might be a good time to refinance your mortgage and learn about the significance of a 1% rate change on your mortgage payments. Understand the concept of a mortgage rate lock and how to transition from an adjustable-rate mortgage to a fixed-rate one.
Curious about mortgage lenders? These financial institutions provide loans to homebuyers and differ from loan servicers. Learn about the refinancing process, where you trade in your current mortgage for better terms and lower rates with a new lender. Even if you’ve owned a home in the past, you may still qualify for homebuyer assistance programs. Discover more about adjustable-rate mortgages (ARMs), which offer variable rates compared to fixed-rate mortgages, and how to negotiate your mortgage rate.
Furthermore, understand what happens to your mortgage after you pass away, as it is handled differently from other debts. Dive into our comprehensive collection of personal finance guides to help you manage your budget, reach your financial goals, and build your wealth.
Before passing on any assets to your heirs, it’s important to note that most mortgages are not transferable. This means that the home must be fully paid off in order to transfer the property title, and only those who originally signed on to the loan can be held liable for the mortgage. To understand what happens to your mortgage after death, it’s essential to be informed about the process.
If you already own a home and need to cover a high-dollar or unexpected cost, you can tap into your home’s equity for financial assistance. Whether you need cash for home renovations, to pay off high-interest credit card debt, or to handle an emergency, leveraging your home’s value can provide you with lower interest rates without the need to refinance and without losing your existing low-rate mortgage. Typically, you’ll need good to excellent credit and have built up enough equity in your home to access these funds.
It’s important to stay informed about current rates and promotions, as these can vary by region and are subject to change. Make sure you understand how to access the equity in your home as interest rates fluctuate.
Editor’s note: The rates mentioned above are accurate as of Thursday, May 8, 2025, at 6 a.m. ET. Please refer to reputable sources for the most up-to-date information on mortgage rates and financial market trends.
Sources:
– Mortgage Industry Insights, Bankrate. Accessed May 8, 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 8, 2025.
