Tomorrow’s CPI and Fed news will tell about the future of rates

Mortgage rates are up across the board — the average 15-year fixed rate is back up over 6%. and the 30-year fixed rate is inching closer to 7%.

This is set to be a big week for mortgage rates. Tomorrow, the U.S. Bureau of Labor Statistics releases the May Consumer Price Index report. CPI is a key way of measuring inflation. The Federal Reserve will also announce any changes to the federal funds rate tomorrow. It’s generally expected that the Fed will not cut its rate this month, but any comments from Federal Reserve Chair Jerome Powell could give us a pulse on what the central bank is thinking — and where mortgage rates might go through the rest of 2024.

Today’s mortgage rates

Here are the current mortgage rates, according to our latest Zillow data:

• 30-year fixed: 6.73%

• 20-year fixed: 6.29%

• 15-year fixed: 6.05%

• 5/1 ARM: 6.73%

• 7/1 ARM: 6.93%

• 30-year FHA: 6.10%

• 15-year FHA: 5.95%

• 30-year VA: 6.05%

• 15-year VA: 5.62%

• 5/1 VA: 6.12%

Remember that these are the national averages and rounded to the nearest hundredth.

Almost all mortgage rates went up today. The exceptions are the 15-year FHA rate (which stayed stagnant) and 5/1 ARM rate (which decreased by two basis points).

Dig deeper: When will mortgage rates go down? A look at 2024 and 2025.

30-year vs. 15-year fixed mortgage rates

As a rule of thumb, 15-year mortgage rates are lower than 30-year mortgage rates. When comparing 15- versus 30-year mortgage rates, know that the shorter term will save you money on interest in the long run. However, your monthly payments will be higher because you’re paying off the same loan amount in half the time.

For example, with a $400,000 30-year mortgage and a 6.73% rate, you’ll make a monthly payment of about $2,563 toward your mortgage principal and interest. As interest accumulates over decades, you’ll end up paying $526,747 in interest.

If you get a $400,000 15-year mortgage with a 6.05% rate, you’ll pay about $3,352 monthly toward your principal and interest. However, you’ll only pay $207,428 in interest over the years.

To play around with rates, term lengths, and more, use our free Yahoo Finance mortgage calculator and see what you would pay each month in different scenarios.

Fixed-rate vs. adjustable-rate mortgages

With a fixed-rate mortgage, your rate is locked in from day one. However, you will get a new rate if you refinance your mortgage.

An adjustable-rate mortgage keeps your rate the same for a set period of time. Then the rate will go up or down depending on several factors, such as the economy and the maximum amount your rate can change according to your contract. For example, with a 7/1 ARM, your rate would be locked in for the first seven years, then change every year for the remainder of your term.

Adjustable rates typically start lower than fixed rates, but once the initial rate-lock period ends, you risk your interest rate going up.

Dig deeper: Adjustable-rate vs. fixed-rate mortgage — Which should you choose?

When will mortgage rates finally drop?

In Fannie Mae’s Housing Forecast for May, the government-sponsored enterprise said it expects 30-year fixed rates to end 2024 at 7%. The Mortgage Bankers Association predicted a slightly lower rate of 6.5% by Q4 2024. So while rates may drop later this year, they probably won’t fall as drastically as many people had initially expected.

The trajectory of future mortgage rates will largely depend on the Federal Reserve’s decision on whether or not to cut the federal funds rate at its meetings throughout the year. The federal funds rate doesn’t directly impact mortgage rates, but it is a good indicator of how the economy is doing overall. So when the Fed rate drops, mortgage rates typically go down too. The next Federal Reserve meeting is tomorrow.

Learn more: What the Fed rate decision means for bank accounts, CDs, loans, and credit cards