Today's Mortgage Rates - 05/16/2024

Mortgage Rates Continue Slide

Mortgage rates eased a little more this week, stepping a little further from 2024 highs.

As reported by Freddie Mac today, the average offered interest rate for a conforming 30-year fixed-rate mortgage (FRM) decreased by another seven basis points (0.07%), falling to 7.02%. While it is s fifth consecutive week above the 7% mark, prospects are good that rates will fall below this level next week.

Average offered rates for 15-year fixed-rate mortgages declined as well, although they managed a ten basis point decline (0.10%). This left the average rate for the most common shorter-term mortgage at 6.28%, about a fifth of a percentage point below its recent peak.

Relative to a long-term fixed-rate mortgage, the offered rate for the most popular ARM was somewhat less attractive. The Mortgage Bankers Association reported that the initial fixed rate for the first five years of a 5/1 hybrid ARM declined only slightly in their latest survey week, where a four basis point (0.04%) decline trimmed the average rate to 6.56%. For a $300,000 loan, the 46 basis-point gap between the 30-year FRM and 5/1 Hybrid ARM creates a payment that is only about $92 per month lower, saving a borrower just over $6,900 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.

While the inflation data driving the interest rate markets this week was mixed, investors chose to focus on the CPI data for April, which actually came in with a slightly smaller increase than expected. It was the first time in four months that this inflation report was somewhat more comfortable for both financial markets and the Fed. and some interest rate pressure was relieved as a result.

It is just one report, though. The Fed will likely want to see several more favorable inflation reports before regaining the kind of confidence about price pressures to allow them to again consider cutting rates. Offsetting the better CPI report were more unfavorable reports covering price pressures at the producer level of the economy as well as one covering changes in import and export costs. These have less direct influence on final consumer costs and carry less weight with investors and the Fed.

For now, recent data suggesting that the economy is becoming more sluggish and at least one showing a softer trend for prices is enough to allow interest rates to settle back a bit further, so somewhat lower mortgage rates should be in the markets for at least 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.