30-Year Mortgage Rate Dips to 7.03% as 15-Year Falls to 6.50%

The 30-year fixed mortgage rate fell one basis point to 7.03% on Tuesday. This slight decrease keeps the benchmark rate firmly above the 7% threshold.

Shorter-term options saw larger declines in the national averages. The 15-year fixed rate dropped six basis points to 6.50%, while the 5/1 ARM decreased ten basis points to 6.94%.

Refinance costs remain higher than purchase rates

Refinancing the 30-year fixed loan costs 7.10%, a full basis point above purchase rates. Borrowers seeking to lower their payments face this premium for shorter terms like the 15-year, which sits at 6.54%.

VA loan options offer slightly lower entry points for eligible veterans. The 30-year VA rate stands at 6.53% for purchases and 6.58% for refinances, providing a modest saving compared to conventional products.

Interest savings depend heavily on loan term

Choosing a 15-year term over a 30-year term significantly reduces total interest paid. A $400,000 loan at 5.65% for 15 years costs $194,047 in interest, compared to $481,021 over 30 years.

Monthly payments are higher for the shorter term, requiring about $3,300 versus $2,447. Borrowers who cannot afford the higher monthly outlay may opt for the 30-year term and make extra payments to lower total costs.

Adjustable rates carry future uncertainty

The 5/1 ARM currently offers a 6.94% rate, lower than the fixed 30-year option. However, the rate adjusts annually after the first five years, exposing borrowers to potential increases based on economic conditions.

Yahoo Finance notes that ARM starting rates are often higher than fixed rates today. This eliminates the traditional discount for adjustable products, making fixed-rate mortgages the safer choice for many buyers.