The mortgage rate roller coaster has come to a gentle but sure halt in recent weeks, but economists warn that more volatility could follow.
The 30-year, fixed-rate mortgage averaged 6.76% as of Thursday, according to mortgage giant Freddie Mac, a buyer of loans from banks. It’s the same average as last week but significantly lower than the comparable week last year, when the average stood at 7.09%.
The 15-year, fixed-rate mortgage eased, averaging 5.89%, Freddie Mac’s data showed. That’s down from 6.38% a year ago at the comparable time.
Daily mortgage rates — often more variable because they are susceptible to the ups and downs of financial markets — had also eased slightly as of Thursday, according to Mortgage News Daily.
The 30-year, fixed-rate mortgage was slightly lower at 6.86%, and the 15-year, fixed-rate mortgage had eased to 6.19%. Though both figures were lower than the previous day, they were higher than the same time a week earlier.
Relationship between the Federal Reserve and mortgage rates
Thursday's data comes just a day after the Federal Reserve announced it was holding interest rates steady, citing concerns about tariffs increasing the risks for higher inflation and unemployment.
What does that decision mean for the mortgage market?
First, it's important to know that mortgage rates aren't set or directly affected by the central bank. It's more of a nuanced ripple effect wherein the Fed makes a decision, investors across financial markets react, and those reactions can make waves in the mortgage market.
That said, the downward trend in mortgage rates so far has been more of a product of movement in financial markets than the Fed's decision-making, according to Matthew Graham, chief operating officer of Mortgage News Daily.
"There was nothing the Fed could do today but sit on its hands and wait," Graham wrote in a post Wednesday. "As for mortgage rates, they were indeed modestly lower, but the bond market movement that made that possible was already in place beforehand. Additionally, the improvement is small enough as to be considered more of a sideways drift in the bigger picture."
In the short term, that volatility could first send mortgage rates lower, said Melissa Cohn, regional vice president of William Raveis Mortgage.
“Mortgage rates will drop a bit this week as bonds have cheered the Fed’s decision to leave rates alone," Cohn said in a statement.
Looking even farther forward, economists say mortgage rates will likely continue to follow a volatile trend.
Incoming data about the economy — and tariffs — will dictate investor decisions and Fed behavior, according to Mike Fratantoni, chief economist of the Mortgage Bankers Association.
"The hard data on inflation and unemployment will continue to drive interest rates, including mortgage rates, from one end of a trading range to the other, with only a slight downward trend in mortgage rates over the remainder of 2025," he said in a statement.
Borrowers are taking advantage of easing costs
Despite lingering uncertainty in the mortgage market, some borrowers are getting back into the market, Mortgage Bankers Association data showed.
Applications for mortgages increased 11% in the week ended May 2. The growth was driven by increased demand from homeowners looking to refinance their loans and buyers purchasing a home, according to the data.
Again, the data isn't entirely straightforward. Mortgage applications have been decreasing in recent weeks, so weekly increases may be offsetting some of the initial decline.
But at the same time, and more encouragingly, mortgage demand is outpacing last year's rate, a sign that consumers are acclimating to the rate environment and still engaging in the market.
“Purchase mortgage application volume continues to run ahead of last year’s pace, and MBA forecasts that will be true for the year as a whole, even with the rate volatility we have experienced," Fratantoni said of the data.