Average mortgage rates were mostly up compared to a week ago, according to data compiled by Bankrate. Rates for 30-year fixed, 5/1 ARMs, and jumbo loans moved higher, while 15-year fixed rates declined.
Mortgage rates have been on a wild ride as of late, with the 30-year fixed now past the once-unthinkable threshold of 7 percent as the Federal Reserve cracks down on inflation.
“The speed with which mortgage rates have increased in recent months has been whiplash-inducing and the cumulative effect — from near 3 percent at the beginning of the year to near 7 percent now — would’ve seemed laughably unlikely at the beginning of the year,” says Greg McBride, chief financial analyst for Bankrate. “Inflation running at 40-year highs will do that.”
The central bank raised rates again at its November meeting — but what comes next is a toss-up. Some anticipate more forward marching for mortgage rates, possibly tapping 8 percent, while others say subsequent Fed hikes have already been accounted for and rates should stabilize. Others see the Fed pulling back at the end of the year.
Rates accurate as of March 8, 2023.
The rates listed here are Bankrate’s overnight average rates and are based on the assumptions shown here. Actual rates displayed within the site may vary. This story has been reviewed by Suzanne De Vita. All rate data accurate as of Wednesday, March 8th, 2023 at 7:30 a.m.
You can save thousands of dollars over the life of your mortgage by getting multiple offers.
“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, Bankrate senior economic analyst. “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
30-year mortgage moves higher, +0.08%
The average rate for the benchmark 30-year fixed mortgage is 7.11 percent, up 8 basis points over the last week. Last month on the 8th, the average rate on a 30-year fixed mortgage was lower, at 6.55 percent.
At the current average rate, you’ll pay $672.71 per month in principal and interest for every $100,000 you borrow. That’s $5.39 higher compared with last week.
30-year mortgage vs. 15-year mortgage
Traditional lending practices defer to the 30-year, fixed-rate mortgage as the go-to for most borrowers buying a home as it allows the borrower to scatter loan payments out over 30 years, keeping their monthly payment lower.
With a 15-year mortgage, however, borrowers are able to pay off their loan in half the time — if they’re able and willing to bump up the amount of their monthly loan payment. The primary difference between qualifying for a 15-year versus a 30-year mortgage is that you’ll need a higher income and lower debt-to-income (DTI) ratio to obtain the former because the monthly payments are inflated.
15-year fixed mortgage moves lower,-0.01%
The average 15-year fixed-mortgage rate is 6.30 percent, down 1 basis point over the last week.
Monthly payments on a 15-year fixed mortgage at that rate will cost approximately $860 per $100k borrowed. Yes, that payment is much bigger than it would be on a 30-year mortgage, 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 upward, +0.07%
The average rate on a 5/1 ARM is 5.87 percent, ticking up 7 basis points over the last week.
Adjustable-rate mortgages, or ARMs, are mortgage loans that come with a floating interest rate. To put it another way, the interest rate can change intermittently throughout the life of the loan, unlike fixed-rate mortgages. These loan types are best for people who expect to refinance or sell before the first or second adjustment. Rates could be materially 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 5.87 percent would cost about $591 for each $100,000 borrowed over the initial five years, but could ratchet higher by hundreds of dollars afterward, depending on the loan’s terms.
Jumbo mortgage moves upward, +0.10%
The average rate for a 30-year jumbo mortgage is 7.16 percent, up 10 basis points from a week ago. Last month on the 8th, the average rate was below that, at 6.59 percent.
At today’s average jumbo rate, you’ll pay a combined $676.08 per month in principal and interest for every $100,000 you borrow. That’s an increase of $6.74 over what you would have paid last week.
Summary: How mortgage rates have changed
- 30-year fixed mortgage rate: 7.11%, up from 7.03% last week, +0.08
- 15-year fixed mortgage rate: 6.30%, down from 6.31% last week, -0.01
- 5/1 ARM mortgage rate: 5.87%, up from 5.80% last week, +0.07
- Jumbo mortgage rate: 7.16%, up from 7.06% last week, +0.10
Mortgage refinance rates
30-year fixed-rate refinance declines, –0.03%
The average 30-year fixed-refinance rate is 7.08 percent, down 3 basis points over the last seven days. A month ago, the average rate on a 30-year fixed refinance was lower, at 6.62 percent.
At the current average rate, you’ll pay $670.68 per month in principal and interest for every $100,000 you borrow. That’s lower by $2.03 than it would have been last week.
Where mortgage rates are 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 options
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.
Is now a good time to buy a house?
There’s never a straightforward answer to this question. It always depends. Do you have a reliable income, a good credit score and money saved for a down payment and repairs? If you can answer all of those questions affirmatively, you’re ready to buy.
However, the pandemic has led to an even greater shortage of homes. That’s caused a bidding war and rising prices. Those trends mean it can be a frustrating market for buyers.
Learn more:
Featured lenders for today, March 8, 2023
Source: bankrate.com