Today's Mortgage Rates & Trends - May 4, 2023: Rates Drop

Mortgage rates moved decidedly downward Wednesday, with many averages dipping by double digits, including an eighth of a percentage point drop for the 30-year average. Only two jumbo products held the line from their previous day's average.

Today's National Mortgage Rate Averages

Rates on 30-year mortgages saw their biggest one-day decline in almost three weeks, shaving 13 basis points off the average Wednesday to land at 6.81%. It's the lowest level we've seen for the flagship average since April 14. This past February, 30-year rates hit a five-month low of 6.11%, but that was after notching a 20-year high of 7.58% in October.

The 15-year rate average dropped more precipitously, sinking a full quarter point Wednesday to 5.96%. It's the first time the average has dipped below 6% since April 13. Rates on 15-year loans saw their recent low point also in February, with a 5.23% reading, as well as a 15-year peak in October, when the average surged to 7.03%.

The jumbo 30-year average held its ground for a fourth day, at 6.02%. That's just 25 basis points below an October peak of 6.27%, which was a 12-year high. The Jumbo 5/6 ARM was also flat Wednesday, while other jumbo averages moved downward.

Refinancing averages moved similarly to new purchase rates, though the 30-year refi average declined by a bolder 21 basis point increment, while the 15-year refi average moved less, at 14 basis points. Like its new purchase counterpart, the jumbo 30-year refi average again held steady. The cost to refinance for 30 years is currently 27 basis points more expensive than 30-year new purchase rates.

After a historical rate plunge in August 2021, mortgage rates skyrocketed in the first half of 2022. Indeed, the 30-year average's mid-June peak of 6.38% was almost 3.5 percentage points above its summer 2021 trough of 2.89%. But the surge last September and October dramatically outdid the summer high, with the 30-year average ultimately reaching 1.2 percentage points higher than the June peak.

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Lowest Mortgage Rates by State

The lowest mortgage rates available vary depending on the state where originations occur. Mortgage rates can be influenced by state-level variations in credit score, average mortgage loan term, and size, in addition to individual lenders' varying risk management strategies.

What Causes Mortgage Rates to Rise or Fall?

Mortgage rates are determined by a complex interaction of macroeconomic and industry factors, such as the level and direction of the bond market, including 10-year Treasury yields; the Federal Reserve's current monetary policy, especially as it relates to funding government-backed mortgages; and competition between mortgage lenders and across loan types. Because fluctuations can be caused by any number of these at once, it's generally difficult to attribute the change to any one factor.

Macroeconomic factors had kept the mortgage market relatively low for much of 2021. In particular, the Federal Reserve had been buying billions of dollars of bonds in response to the pandemic's economic pressures. This bond-buying policy (and not the more publicized federal funds rate) is a major influencer on mortgage rates.

But starting in November 2021, the Fed began tapering its bond purchases downward, making sizable reductions each month until reaching net-zero in March 2022.

The Fed's rate and policy committee, called the Federal Open Market Committee (FOMC), meets every six to eight weeks. The next scheduled meeting is in June.

Methodology

The national averages cited above were calculated based on the lowest rate offered by more than 200 of the country's top lenders, assuming a loan-to-value ratio (LTV) of 80% and an applicant with a FICO credit score in the 700–760 range. The resulting rates are representative of what customers should expect to see when receiving actual quotes from lenders based on their qualifications, which may vary from advertised teaser rates.

For our map of the best state rates, the lowest rate currently offered by a surveyed lender in that state is listed, assuming the same parameters of an 80% LTV and a credit score between 700–760.