Today's Mortgage Rates - 05/09/2024

Rates Ease A Little

A softer-than-expected employment report last Friday helped lower mortgage rates a little this week.

Freddie Mac reported today that the average offered interest rate for a conforming 30-year fixed-rate mortgage (FRM) decreased by thirteen basis points (0.13%), dropping back to 7.09%. It is the first decline for the most popular mortgage rate in six weeks.

Average offered rates for 15-year fixed-rate mortgages followed suit, posting a nine basis point (0.09%) decline. This put the average rate for the most common shorter-term mortgage at 6.38%, a four-week low.

Relative to a long-term fixed-rate mortgage, the offered rate for the most popular ARM was somewhat less attractive this week. The Mortgage Bankers Association reported that the initial fixed rate for the first five years of a 5/1 hybrid ARM remained unchanged in their latest survey week, holding at an average of 6.60% again. For a $300,000 loan, the 49 basis-point gap between the 30-year FRM and 5/1 Hybrid ARM creates a payment that is only a bit over $100 per month lower, saving a borrower only about $7,400 in interest cost over the first five years of the loan. That's not a huge difference, but given today's interest rate and home price climate, even a small differential may have value for some homebuyers.

ARMs are not a set-it-and-forget-it loan product, though. If you're interested in learning the advantages (and drawbacks) of ARMs, you should read HSH's comprehensive Guide to Adjustable Rate Mortgages.

After the Fed meeting last week, investors were more strongly convinced that there was virtually no chance of a rate cut anytime soon. However, the April employment report, while healthy, was far softer than forecasts, and also noted smaller wage gains. While this didn't change the expectation for a rate cut in June, it did improve the odds somewhat for one to come in July or September. For the Fed to again become confident that inflation is on a path to return to it's 2% core PCE target, the central bank will want to see several months of cooler economic growth and benign inflation readings.

The start of those could come as soon as next week, when updates on producer, consumer and import/export prices are due. Of course, any one or all of them could come in higher than expected, too, and that's at least part of the reason the yields that influence mortgage rates have mostly leveled off over the last couple of days. Investors also need to see more evidence that inflation is again waning before they make decisions as to how best to put their money to work.

We'll know soon enough. Until we do, there's only perhaps a slight bit of easing bias in place for mortgage rates at the moment. More likely is that they will hold at about current levels for the next few days/

Each week in HSH's MarketTrends newsletter, we track and discuss economic conditions that affect mortgage rates and their impact on housing markets and consumers. Read the most recent edition of MarketTrends or subscribe for email delivery.