Today's Mortgage Rates - 05/02/2024

Rates Still Trending Higher

While the Fed made no change to policy this week, mortgage rates still edged higher.

As reported by Freddie Mac, the average offered interest rate for a conforming 30-year fixed-rate mortgage (FRM) increased by five more basis points (0.05%) to 7.22%. the highest this average has been in 22 weeks.

The average offered rates for a fifteen-year fixed-rate mortgage also trended higher this week, rising by another three basis points (0.03%) to 6.47%, also more than a five-month high.

Relative to a long-term fixed-rate mortgage, the offered rate for the most popular ARM was somewhat more attractive again this week. The Mortgage Bankers Association reported that the average offered rate for first five years of a 5/1 hybrid ARM decreased by four basis points (0.04%) in their latest survey week, trimming the average rate to 6.60%. With a $300,000 loan, the 62 basis-point gap between the 30-year FRM and 5/1 Hybrid ARM creates a payment that is almost $125 per month lower and would save a borrower $over $9,300 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 small savings are valuable.

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.

With inflation trending in the wrong direction so far in 2024, the Fed decided to hold interest rates level for a sixth consecutive meeting. While no rate cut came at the close of the April 30-May 1 Fed meeting, Fed Chair Powell did allay at least a few investor concerns that the Fed might actually be considering additional hikes in the federal funds rate to further damp inflation. Mr. Powell said that an increase in rates was "unlikely",

However, little else from the meeting and press conference suggested that a move to lower rates was likely anytime soon, either. Mr. Powell downplayed the considerable softening in GDP growth in the first quarter of 2024, citing more positive underlying trends, and employee wage and benefit compensation accelerated during the first quarter. This added at least some additional worries that strong wage gains may help perpetuate price pressures.

Compared to where they were a week ago, influential bond yields have trended somewhat lower over the last few days, although the downturn has been fairly shallow and uneven. Still, it does lend a little hope that mortgage rates have stopped rising and may be poised to ease ever so slightly, and borrowers should expect to see this in the markets over the coming days. Tomorrow's employment report for April could enhance the downturn for rates or reverse it, though, so routine progress remains uncertain at the moment.

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.