Mortgage Rates Near 7% Despite Fed Cuts

Mortgage rates in the U.S. have shown minimal movement in recent days, with the average interest rate for a 30-year, fixed-rate conforming mortgage loan standing at 6.774%. This figure represents a slight increase of approximately 2 basis points from the previous day and about 7 basis points from a week ago. The stability in rates comes after a period of fluctuations, with rates for various mortgage types experiencing both increases and decreases over the past month.

For instance, the 30-year jumbo mortgage rate has decreased from 7.021% a week ago to the current rate of 6.849%. Similarly, the 30-year FHA mortgage rate has risen slightly from 6.475% to 6.579% over the same period. The 30-year VA mortgage rate has also seen a minor increase, moving from 6.326% to 6.399%. The 30-year USDA mortgage rate has decreased from 6.476% to 6.325%. The 15-year conventional mortgage rate has shown minimal change, moving from 5.880% to 5.901% over the past week.

The current stability in mortgage rates reflects a broader economic context where rates have been hovering near 7% for an extended period. Many had hoped that the Federal Reserve's rate cuts starting in September 2024 would lead to a softening of mortgage rates, but this has not materialized. Instead, rates briefly dipped before rising again, reaching a peak of over 7% in January 2025. This is a significant shift from the historic low of 2.65% seen in January 2021, during the height of the pandemic-induced economic stimulus.

Experts agree that without another major economic disruption, mortgage rates are unlikely to return to the 2% to 3% range seen in recent years. However, rates around the 6% mark are considered feasible if inflation is managed effectively and economic confidence is restored. Recent fluctuations, including a dip to below 6.5% in early April, highlight the volatility in the market. Current economic uncertainties, such as potential policy changes and their impact on the labor market and inflation, continue to influence mortgage rates.

For homebuyers, navigating the current mortgage landscape requires a strategic approach. Ensuring a strong credit profile, maintaining a low debt-to-income ratio, and shopping around with multiple lenders are key steps to securing the best possible rate. Lenders typically look for a credit score of at least 620 for conventional mortgages, but a score of 740 or higher is considered top tier and can result in significant savings over the life of the loan. Keeping the debt-to-income ratio below 36% is also crucial for mortgage approval and favorable rates.

Comparing rates across different types of loans and lenders is essential. Conventional mortgages may offer the best rates for those with excellent credit, while FHA loans can be more accessible for those with lower credit scores. Shopping around with various lenders can result in substantial savings, with Freddie Mac research indicating that homebuyers can save $600 to $1,200 annually by applying with multiple lenders in a high-interest rate market.

Historically, the current rates are not unprecedented. In the 1990s, 7% mortgage rates were common, and rates in the 1970s and 1980s were significantly higher, with peaks above 18% in 1981. The current economic conditions, including inflation fears and the national debt, continue to influence mortgage rates. The Federal Reserve's actions, particularly its management of the federal funds rate and its balance sheet, play a critical role in shaping mortgage interest rates. As the Fed continues to adjust its policies, mortgage rates are likely to remain volatile, reflecting the broader economic landscape.