A few notable mortgage rates increased over the last seven days. The average interest rates for both 30-year fixed and 15-year fixed mortgages both drifted higher. We also saw average rates for 5/1 adjustable-rate mortgages lift.
The Federal Reserve announced a 25-basis point increase to its benchmark short-term interest rate on March 22. This could have an impact on mortgage rates, but it’s difficult to say just how much for a market already in flux.
“We’re in one of the most volatile markets in terms of rates since 2008,” said Jennifer Beeston, senior vice president at Guaranteed Rate, a national mortgage lender.
Mortgages hit a 20-year high in late 2022, but now the macroeconomic environment is changing again. Rates dipped significantly in January before climbing back up in February.
While rates don’t directly track changes to the federal funds rate, they do respond to inflation. Overall, inflation remains high but has been slowly but consistently falling every month since it peaked in June 2022.
After raising rates dramatically in 2022, the Fed opted for smaller, 25-basis-point rate increases in its first two meetings of 2023. The decision to hike by 0.25% on March 22 suggests that inflation is cooling and the central bank may be able to ease up — but not stop — on its rate hikes.
While mortgage rates have dipped a bit from their December 2022 peak, they still aren’t dramatically lower. Fewer buyers are willing to jump into the housing market, driving demand down and causing home prices to ease, but that’s only part of the home affordability equation.
“Even though home prices in many parts of the country have fallen since the start of the year, high rates make buying prohibitively expensive for many,” said Jacob Channel, senior economist at loan marketplace LendingTree. It’s still difficult for many buyers, particularly those looking for their first home, to afford a monthly payment.
What does this mean for homebuyers this year? Mortgage rates are likely to decrease slightly in 2023, although they’re highly unlikely to return to the rock-bottom levels of 2020 and 2021. However, rate volatility may continue for some time. “Expect mortgage rates to yo-yo up and down in the first half of the year, at least until there is a consensus about when the Fed will conclude raising interest rates,” said Greg McBride, CFA and chief financial analyst at Bankrate. (Like CNET Money, Bankrate is owned by Red Ventures.) McBride expects rates to fall more consistently as the year progresses. “Thirty-year fixed mortgage rates will end the year near 5.25%,” he said.
Rather than worrying about market mortgage rates, homebuyers should focus on what they can control: getting the best rate they can for their situation. Take steps to improve your credit score and save for a down payment to increase your odds of qualifying for the lowest rate available. Also, be sure to compare the 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.
“Instead of getting into the minutiae of what the market’s doing every 6 seconds, buyers need to focus on what it is they’re really trying to accomplish and have a good game plan,” Beeston said.
30-year fixed-rate mortgages
For a 30-year, fixed-rate mortgage, the average rate you’ll pay is 6.88%, which is an increase of 8 basis points compared to one week ago. (A basis point is equivalent to 0.01%.) Thirty-year fixed mortgages are the most common loan term. A 30-year fixed mortgage will often 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 house as quickly and you’ll pay more interest over time, but a 30-year fixed 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 6.25%, which is an increase of 12 basis points from seven days ago. You’ll 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. However, as long as you’re able to afford the monthly payments, there are several benefits to a 15-year loan. You’ll usually get a lower interest rate, and you’ll pay less interest in total because you’re paying off your mortgage much quicker.
5/1 adjustable-rate mortgages
A 5/1 ARM has an average rate of 5.80%, a climb of 9 basis points compared to a week ago. You’ll usually get a lower interest rate (compared to a 30-year fixed mortgage) with a 5/1 ARM in the first five years of the mortgage. But you may end up paying more after that time, depending on the terms of your loan and how the rate adjusts with the market rate. Because of this, an ARM might be a good option if you plan to sell or refinance your house before the rate changes. But if that’s not the case, you might be on the hook for a significantly higher interest rate if the market rates change.
Mortgage rate trends
Mortgage rates were historically low throughout most of 2020 and 2021 but increased steadily throughout 2022. Now, mortgage rates are roughly twice what they were a year ago, pushed up by persistently high inflation. That high inflation prompted the Fed to raise its target federal funds rate seven times in 2022. By raising rates, the Fed makes it more expensive to borrow money and more appealing to keep money in savings, suppressing demand for goods and services.
Mortgage interest rates don’t move in lockstep with the Fed’s actions in the same way that, say, rates for a home equity line of credit do. But they do respond to inflation. As a result, cooling inflation data and positive signals from the Fed will influence mortgage rate movement more than the most recent 25-basis-point rate hike.
We use rates collected by Bankrate to track changes in these daily rates. This table summarizes the average rates offered by lenders across the US:
Average mortgage interest rates
| Product | Rate | Last week | Change |
|---|---|---|---|
| 30-year fixed | 6.88% | 6.80% | +0.08 |
| 15-year fixed | 6.25% | 6.13% | +0.12 |
| 30-year jumbo mortgage rate | 6.93% | 6.86% | +0.07 |
| 30-year mortgage refinance rate | 7.04% | 6.90% | +0.14 |
Rates as of April 21, 2023.
How to find personalized mortgage rates
You can get a personalized mortgage rate by reaching out to your local mortgage broker or using an online calculator. Make sure to think about your current finances and your goals when searching for a mortgage.
Things that affect the mortgage rate you might get include: your credit score, down payment, loan-to-value ratio and your debt-to-income ratio. Generally, you want a higher credit score, a higher down payment, a lower DTI and a lower LTV to get a lower interest rate.
Besides the mortgage interest rate, factors including closing costs, fees, discount points and taxes might also factor into the cost of your house. Make sure to shop around with multiple lenders — including credit unions and online lenders in addition to local and national banks — in order to get a mortgage loan that works best for you.
What’s the best loan term?
One important factor to consider when choosing a mortgage is the loan term, or payment schedule. The loan terms most commonly offered are 15 years 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, interest rates are stable for the life of the loan. For adjustable-rate mortgages, interest rates are fixed for a certain number of years (most frequently five, seven or 10 years), then the rate fluctuates annually based on the current interest rate in the market.
When deciding between a fixed-rate and adjustable-rate mortgage, you should think about how long you plan to live in your house. For people who plan on living long-term in a new house, fixed-rate mortgages may be the better option. Fixed-rate mortgages offer greater stability over time compared to adjustable-rate mortgages, but adjustable-rate mortgages may offer lower interest rates upfront. However, you could get a better deal with an adjustable-rate mortgage if you’re only planning to keep your home for a few years. The best loan term depends on an individual’s situation and goals, so make sure to think about what’s important to you when choosing a mortgage.
