A variety of major mortgage rates have risen slightly over the past seven days. Average interest rates for 15-year and 30-year fixed mortgages have increased. The average rate of the most common type of variable rate mortgage, the 5/1 variable rate mortgage, also rose.
After nearly a year of rising mortgage rates, borrowers finally saw some relief late last year. Rates have declined since peaking at the end of 2022, although current rates remain nearly double what they were during the record high rate environment of the pandemic.
Inflation and the series of rate hikes put in place by the Federal Reserve in 2022 in an attempt to curb it have partly contributed to the rise in mortgage rates. Mortgage rates hit a 20-year high at the end of 2022, but now the macroeconomic environment is changing again.
Headline inflation remains high but has been slowly but steadily falling every month since peaking in June 2022. The Fed’s decision to raise the federal funds rate by 0.25% on February 1 after its last meeting – the smallest increase since March 2022 – suggests that the inflation may slow and the central bank may be able to ease its rate hikes.
What does this mean for buyers this year? Mortgage rates are expected to decline slightly in 2023, although they are very unlikely to return to the lows of 2020 and 2021. However, rate volatility could continue for some time. “Expect mortgage rates to rise and fall in the first half of the year, at least until there is a consensus on when the Fed will conclude the interest rate hike. “, says Greg McBride, CFA and chief financial analyst at Bankrate. (Like CNET Money, Bankrate is owned by Red Ventures.) McBride expects rates to fall more steadily as the year progresses. “Thirty-year fixed mortgage rates will end the year near 5.25%,” he predicts.
Rather than worrying about market mortgage rates, homebuyers should focus on what they can control: getting the best rate possible for their situation. Take steps to improve your credit score and save for a down payment to increase your chances of qualifying for the lowest rate available. Also, be sure to compare rates and fees from multiple lenders to get the best deal. Looking at the annual percentage rate, or APR, will show you the total cost of borrowing and help you compare apples to apples.
30 Year Fixed Rate Mortgages
For a 30-year fixed-rate mortgage, the average rate you’ll pay is 7.13%, up 7 basis points from a week ago. (One basis point equals 0.01%.) Thirty-year fixed mortgages are the most commonly used loan term. A 30-year fixed rate mortgage will generally have a higher interest rate than a 15-year fixed rate mortgage, but also a lower monthly payment. You won’t be able to pay off your home as quickly and you’ll pay more interest over time, but a 30-year fixed rate mortgage is a good option if you’re looking to minimize your monthly payment.
15-year fixed rate mortgages
The average rate for a 15-year fixed mortgage is 6.34%, up 6 basis points from a week ago. You will definitely have a higher monthly payment with a 15-year fixed mortgage compared to a 30-year fixed mortgage, even if the interest rate and loan amount are the same. But a 15-year loan will usually be the best deal, if you can afford the monthly payments. These typically include the ability to get a lower interest rate, pay off your mortgage sooner, and pay less total interest over the long term.
5/1 Adjustable Rate Mortgages
A 5/1 variable rate mortgage has an average rate of 5.88%, an addition of 7 basis points from the same time last week. With an ARM mortgage, you’ll typically get a lower interest rate than a 30-year fixed mortgage for the first five years. But market fluctuations may cause your interest rate to increase after this period, as stated in the terms of your loan. For this reason, an adjustable rate mortgage can be a good option if you plan to sell or refinance your home before the rate changes. Otherwise, market changes can significantly increase your interest rate.
Mortgage Rate Trends
Mortgage rates have been historically low for most of 2020 and 2021, but have risen steadily throughout 2022. The Federal Reserve has raised the target federal funds rate – which influences the cost of most consumer loans , including mortgages – seven times in 2022 in an attempt to rein in record inflation. Although the Fed does not directly control mortgage rates, higher inflation and a higher federal funds rate tend to cause mortgage rates to rise.
The Fed’s latest 0.25% increase — down from its previous six increases of 0.75% or 0.5% — represents a shift in Fed stance and suggests the central bank could be less aggressive in its moves. rate hikes in 2023 if inflation continues to come low. But inflation is still far from the Fed’s 2% target range and Fed officials have repeatedly stated (PDF) that additional – albeit smaller – rate hikes will be needed. All told, while we may see mortgage rates gradually coming down this year, borrowers shouldn’t expect a big drop or a return to pandemic lows.
We use information collected by Bankrate, which is owned by the same parent company as CNET, to track daily mortgage rate trends. This table summarizes the average rates offered by lenders across the country:
Current Average Mortgage Interest Rates
|Type of loan||Interest rate||A week ago||Change|
|30-year fixed rate||7.13%||7.06%||+0.07|
|Fixed rate over 15 years||6.34%||6.28%||+0.06|
|30-year jumbo mortgage rate||7.19%||7.11%||+0.08|
|30-year mortgage refinance rate||7.12%||7.14%||-0.02|
Rates as of March 9, 2023.
How to Find Custom Mortgage Rates
When you’re ready to apply for a loan, you can connect with a local mortgage broker or search online. When looking at mortgage rates, think about your current goals and finances.
Specific interest rates will vary based on factors such as credit rating, down payment, debt to income ratio and loan to value ratio. Generally, you want a good credit rating, a larger down payment, a lower DTI, and a lower LTV to get a lower interest rate.
Besides the interest rate, other costs including closing costs, fees, discount points, and taxes may also factor into the cost of your home. You should shop around with multiple lenders, such as credit unions and online lenders, in addition to local and national banks, to get the mortgage that’s right for you.
What is a good loan term?
An important factor to consider when choosing a mortgage loan is the length of the loan or the payment schedule. The most commonly offered loan terms are 15 and 30 years, although you can also find 10, 20 and 40 year mortgages. Another important distinction is between fixed rate and adjustable rate mortgages. For fixed rate mortgages, the interest rates are fixed for the term of the loan. Unlike a fixed rate mortgage, interest rates on a variable rate mortgage are only the same for a certain amount of time (usually five, seven or 10 years). After that, the rate changes every year according to the market rate.
When choosing between a fixed rate mortgage and an adjustable rate mortgage, you need to think about how long you plan to live in your home. If you plan to live long term in a new home, fixed rate mortgages may be the best option. Fixed rate mortgages offer more stability over time compared to adjustable rate mortgages, but adjustable rate mortgages can sometimes offer lower interest rates upfront. If you don’t plan to keep your new home for more than three to 10 years, an adjustable rate mortgage may give you a better deal. The best loan term depends entirely on your specific situation and goals, so be sure to think about what’s important to you when choosing a mortgage.