Average mortgage rates moved higher for all types of loans compared to a week ago, according to data compiled by Bankrate. Rates for 30-year fixed, 15-year fixed, 5/1 ARMs and jumbo loans jumped.
The Federal Reserve has lifted rates 10 times in a row, most recently at its May 3 meeting. Rates now are at a 15-year high, but the consensus is that inflation is finally cooling and the central bank might halt raising rates.
”Mortgage rates have settled into a new normal of around 6.5 percent on a 30-year fixed-rate loan,” says Lisa Sturtevant, chief economist at Bright MLS, a large multiple listing service in the Middle Atlantic region. ”With growing recession risks, we could see mortgage rates dip lower, but we will not be returning to the 3 percent level seen during the height of the pandemic.”
Rates as of June 14, 2023.
The rates listed above are averages based on the assumptions shown here. Actual rates available within the site may vary. This story has been reviewed by Suzanne De Vita. All rate data accurate as of Wednesday, June 14th, 2023 at 7:30 a.m.
>>View historical mortgage rate movements
You can save thousands of dollars over the life of your mortgage by getting multiple offers. Comparing mortgage offers from multiple lenders is always a smart move, but shopping around grew especially critical during the interest rate run-up of 2022, according to research by mortgage giant Freddie Mac. It found the payoff for bargain-huntng borrowers doubled last year.
“All too often, some homeowners take the path of least resistance when seeking a mortgage, in part because the process of buying a home can be stressful, complicated and time-consuming,” says Mark Hamrick, senior economic analyst for Bankrate. “But when we’re talking about the potential of saving a lot of money, seeking the best deal on a mortgage has an excellent return on investment. Why leave that money on the table when all it takes is a bit more effort to shop around for the best rate, or lowest cost, on a mortgage?”
Mortgage rates for home purchase
Today’s 30-year mortgage rate trends upward, +0.02%
The average rate you’ll pay for a 30-year fixed mortgage is 7.04 percent, up 2 basis points over the last seven days. This time a month ago, the average rate on a 30-year fixed mortgage was lower, at 6.96 percent.
At the current average rate, you’ll pay principal and interest of $667.99 for every $100,000 you borrow. That’s an additional $1.34 per $100,000 compared to last week.
The 30-year mortgage is the most popular option for homeowners, and this type of loan has a number of advantages, including:
- Lower monthly payment. The 30-year mortgage offers lower, more affordable payments spread over time compared with shorter-term mortgages.
- Stability. With the 30-year, you lock in a consistent principal and interest payment. That predictability lets you plan your housing expenses for the long term. Keep in mind: Your monthly housing payment can change if your homeowners insurance and property taxes go up or, less likely, down.
- Buying power. With lower payments, you can qualify for a larger loan amount and a more expensive home.
- Flexibility. Lower monthly payments can free up some of your monthly budget for other goals, like saving for emergencies, retirement, college tuition or home repairs and maintenance.
- Strategic use of debt. Some argue that Americans focus too much on paying down their mortgages rather than adding to their retirement accounts. A 30-year fixed-rate mortgage with a lower monthly payment can allow you to save more for retirement.
15-year mortgage moves up,+0.08%
The average 15-year fixed-mortgage rate is 6.46 percent, up 8 basis points over the last week.
Monthly payments on a 15-year fixed mortgage at that rate will cost approximately $869 per $100,000 borrowed. The bigger payment may be a little more difficult to find room for in your monthly budget than a 30-year mortgage payment would, but it comes with some big advantages: You’ll come out several thousand dollars ahead over the life of the loan in total interest paid and build equity much more rapidly.
5/1 ARM rate moves up, +0.03%
The average rate on a 5/1 adjustable rate mortgage is 6.09 percent, up 3 basis points from a week ago.
Adjustable-rate mortgages, or ARMs, are mortgage terms that come with a floating interest rate. To put it another way, the interest rate can change periodically throughout the life of the loan, unlike fixed-rate loans. These loan types are best for people who expect to sell or refinance before the first or second adjustment. Rates could be substantially higher when the loan first adjusts, and thereafter.
While borrowers shunned ARMs during the pandemic days of super-low rates, this type of loan has made a comeback as mortgage rates have risen.
Monthly payments on a 5/1 ARM at 6.09 percent would cost about $605 for each $100,000 borrowed over the initial five years, but could increase by hundreds of dollars afterward, depending on the loan’s terms.
Jumbo mortgage rate increases, +0.02%
The average rate you’ll pay for a jumbo mortgage is 7.05 percent, an increase of 2 basis points from a week ago. A month ago, the average rate was below that, at 7.01 percent.
At today’s average rate, you’ll pay principal and interest of $668.66 for every $100,000 you borrow. That’s an extra $1.34 compared with last week.
Summary: How mortgage interest rates have shifted over the past week
- 30-year fixed mortgage rate: 7.04%, up from 7.02% last week, +0.02
- 15-year fixed mortgage rate: 6.46%, up from 6.38% last week, +0.08
- 5/1 ARM mortgage rate: 6.09%, up from 6.06% last week, +0.03
- Jumbo mortgage rate: 7.05%, up from 7.03% last week, +0.02
Interested in refinancing? See rates for home refinance
Current 30 year mortgage refinance rate trends upward, +0.05%
The average 30-year fixed-refinance rate is 7.16 percent, up 5 basis points compared with a week ago. A month ago, the average rate on a 30-year fixed refinance was lower, at 7.05 percent.
At the current average rate, you’ll pay $676.08 per month in principal and interest for every $100,000 you borrow. Compared with last week, that’s $3.37 higher.
Rate trends: Where are mortgage rates headed?
The days of sub-3 percent mortgage interest on the 30-year fixed are behind us, and rates have so far risen beyond 7 percent in 2022.
“Low interest rates were the medicine for economic recovery following the financial crisis, but it was a slow recovery so rates never went up very far,” says McBride. “The rebound in the economy, and especially inflation, in the late pandemic stages has been very pronounced, and we now have a backdrop of mortgage rates rising at the fastest pace in decades.”
Comparing mortgage terms
The 30-year fixed-rate mortgage is the most popular option for homeowners, and this type of loan has a number of advantages, including:
- Lower monthly payment: Compared to a shorter term, such as 15 years, the 30-year mortgage offers lower payments spread over time.
- Stability: With a 30-year mortgage, you lock in a consistent principal and interest payment. Because of the predictability, you can plan your housing expenses for the long term. Remember: Your monthly housing payment can change if your homeowners insurance and property taxes go up or, less likely, down.
- Buying power: With lower payments, you can qualify for a larger loan amount and a more expensive home.
- Flexibility: Lower monthly payments can free up some of your monthly budget for other goals, like saving for emergencies, retirement, college tuition or home repairs and maintenance.
- Strategic use of debt: Some argue that Americans focus too much on paying down their mortgages rather than adding to their retirement accounts. A 30-year fixed mortgage with a smaller monthly payment can allow you to save more for retirement.
That said, shorter-term loans have gained popularity as rates have been historically low. Although they have higher monthly payments compared to 30-year mortgages, there are some big benefits if you can afford the upfront costs. Shorter-term loans can help you achieve:
- Greatly reduced interest costs: Because you pay off the loan faster, you’ll be able to pay less interest overall.
- Lower interest rate: On top of less time for that interest to compound, most lenders price shorter-term mortgages with lower rates.
- Build equity faster: The faster you pay off your mortgage, the faster you’ll own value in your home outright. That’s especially handy if you want to borrow against your property to fund other spending.
- Debt-free sooner: A shorter-term mortgage means you’ll own your house free and clear sooner than you would with a longer-term loan.
Determining how much house you can afford
If you’re not sure how much of your income should go toward housing, follow the traditional 28/36 percent rule. Most financial advisers agree that people should spend no more than 28% of their gross income on housing (i.e., your mortgage payment or rent), and no more than 36% of their gross income on total debt, including mortgage payments, credit cards, student loans, medical bills and the like. Calculate how much house you can afford and determine your monthly payments.
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Featured lenders for today, June 14, 2023
Source: bankrate.com