Economic uncertainty freezes both mortgage rates and short-term policy
Mortgage rates barely budged over the past week as the Federal Reserve held short-term interest rates steady, reflecting the ongoing economic uncertainty gripping the housing market.
The 30-year fixed-rate mortgage (FRM) averaged 6.76% as of May 8, exactly the same as the previous week, according to Freddie Mac’s latest Primary Mortgage Market Survey. A year ago, the average for this product was notably higher at 7.09%.
Meanwhile, the 15-year fixed-rate mortgage averaged 5.89%, down slightly from 5.92% the week before, and well below the 6.38% average at this time last year.
“Mortgage rates barely moved in the last week,” said Holden Lewis, home and mortgage expert at NerdWallet. “At the same time, the Federal Reserve kept short-term rates unchanged. Economic uncertainty contributed to the standstill in both places. But uncertainty has another side to it: A bit of unexpected news could move mortgage rates swiftly in either direction.”
While rates remained flat, the housing market saw an unexpected lift in buyer interest.
“At this time last year, the 30-year fixed-rate mortgage was 30 basis points higher and purchase applications were declining,” Freddie Mac chief economist Sam Khater pointed out. “Today, rates are lower and have remained stable for weeks, sparking continued increases in purchase applications.”
Mortgage Bankers Association data showed total loan application activity increased by 11% on a seasonally adjusted basis from the prior week, with both purchase and refinance applications rising 11% week over week.
Conventional purchase application volume rose by 13% and was up 9% compared to the same period last year, a surprisingly strong performance given the backdrop of economic uncertainty.
Read more: Fed, Powell warn Trump: Inflation and unemployment risks rising under tariffs
Despite the positive momentum in applications, broader mortgage market activity showed little month-to-month change.
May’s MCT Indices Report revealed that total lock volume decreased slightly by 1.07% compared to April. Purchase locks were nearly flat, ticking up just 0.59%. Rate/term refinance activity, however, saw a sharper drop of 13.02%, while cash-out refinances declined by 2.83%.
Year-over-year trends painted a more optimistic picture, with total volume up 11.03% and rate/term refinances surging by an impressive 196.19% compared to May 2024.
“These numbers are pretty much in line with what we anticipated going into May,” said Andrew Rhodes, senior director and head of trading at MCT. “Early April started strong with a brief dip in rates, but volatility returned by mid-month, pushing rates higher and muting new volume. It’s basic market behavior, but it’s being driven by an unusually high level of uncertainty right now.”
Stay updated with the freshest mortgage news. Get exclusive interviews, breaking news, and industry events in your inbox, and always be the first to know by subscribing to our FREE daily newsletter.
