Mortgage Rate Update: 30-Year Fixed at 6.375 and Why the 7-Year ARM Is Worth Considering Right Now

A Quick Rate Update After the Fed Decision

The Federal Reserve held interest rates steady at its most recent meeting and made no changes to the federal funds rate. For buyers and homeowners watching mortgage rates that means the environment remains stable for now while the broader story around rate direction continues to develop.

Here is where rates are sitting right now and what products are worth paying attention to.

Current Mortgage Rate Snapshot

The 30-year fixed rate is currently sitting at approximately 6.375 percent. That is the benchmark product that most buyers default to and it remains the most straightforward option for buyers who want the certainty of a payment that does not change for the full life of the loan.

The 5-year ARM is currently at approximately 5.5 percent and the 7-year ARM is at approximately 5.625 percent. Both adjustable rate products are generating significant interest right now because of the meaningful rate difference compared to the 30-year fixed.

Why the 7-Year ARM Deserves Serious Consideration

As Brandon Coll explains the 7-year ARM is currently one of his most popular and most frequently priced products and the reasoning is straightforward. The rate difference between a 7-year ARM at 5.625 and a 30-year fixed at 6.375 is meaningful in monthly payment terms. Over seven years that difference accumulates into real savings for the borrower.

The 7-year ARM gives a buyer enough time to potentially refinance into a lower fixed rate if and when rates come down without the pressure of a shorter adjustment window. If the rate environment improves meaningfully in the next several years as many forecasters expect the ARM borrower captures the lower payment now and has a realistic window to refinance before the adjustable period begins.

For buyers who are not planning to stay in the home for thirty years or who believe rates will be lower in the next several years the 7-year ARM presents a compelling case compared to locking into a higher fixed rate for the full loan term.

What Is Happening With Fed Leadership

Federal Reserve Chair Jerome Powell has indicated he intends to remain on the board, providing some continuity in Fed leadership and communication. Kevin Warsh is expected to take over as Chair on May fifteenth. How the transition affects the Fed's communication style and rate posture going forward is worth watching as the new leadership establishes its approach to the current economic environment.

Brandon Coll will continue monitoring rate developments and will share updates as the situation around Fed leadership and rate direction evolves. Reach out to Brandon Coll directly to discuss which product makes the most sense for your specific situation and timeline.

Sources

FederalReserve.gov MortgageNewsDaily.com FreddieMac.com CNBC.com BankRate.com