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Mortgage rates today, May 7, 2024: Rates rise, but not drastically
See mortgage rates for Wednesday, May 8, 2024
The average 30-year fixed mortgage rate is 7.22% this week, and the 15-year fixed rate is 6.47%. These are both slight increases from last week.
“The 30-year fixed-rate mortgage increased for the fifth consecutive week as we enter the heart of Spring Homebuying Season,” said Sam Khater, chief economist at Freddie Mac, in a press release. “On average, more than one-third of home sales for the entire year occur between March and June. With two months left of this historically busy period, potential homebuyers will likely not see relief from rising rates anytime soon."
So, what do you do if you want to buy a home? You have two main options.
First, you can hold out for rates to drop later in 2024 or 2025. Use this time to improve your credit score, save more for a down payment, or pay down debt to get an even better rate when you're finally ready to buy.
Second, you can move forward now. If you're otherwise financially ready to buy a house and can afford monthly payments at the current mortgage rates, you may not want to hold out for lower rates. Remember, you can always refinance your mortgage in a few years after rates have had time to decline gradually.
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 7.22%, up five basis points from the previous week. This is the fifth straight week of 30-year rate increases.
The average 15-year fixed rate inched up too. It is 6.47%, a three-basis-point increase from the week prior. The 15-year rates have now risen for four consecutive weeks.
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 7.22% rate, you'll make a monthly payment of about $2,720 toward your mortgage principal and interest. As interest accumulates over decades, you’ll end up paying $579,405 in interest.
If you get a $400,000 15-year mortgage with a 6.47% rate, you’ll pay about $3,478 monthly toward your principal and interest. However, you’ll only pay $226,010 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 end up paying 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 also 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
