National mortgage rates were mostly lower compared to a week ago, according to data compiled by Bankrate. Rates for 30-year fixed, 15-year fixed and jumbo loans moved lower, while rates for adjustable rate mortgages rose.
The Federal Reserve has raised 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 5, 2023.
These rates are marketplace averages based on the assumptions here. Actual rates listed across the site may vary. This story has been reviewed by Suzanne De Vita. All rate data accurate as of Monday, June 5th, 2023 at 7:30 a.m.
>>See historical mortgage interest rate movements
You can save thousands of dollars over the life of your mortgage by getting at least three rate quotes. 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
30-year mortgage falls, -0.20%
The average rate you’ll pay for a 30-year fixed mortgage is 6.99 percent, down 20 basis points since the same time last week. A month ago, the average rate on a 30-year fixed mortgage was lower, at 6.87 percent.
At the current average rate, you’ll pay $664.63 per month in principal and interest for every $100k you borrow. That’s lower by $13.48 than it would have been last week.
The 30-year mortgage is the most popular option for borrowers. It has a number of advantages. Among them:
- Lower monthly payment. Compared to a shorter-term mortgage, such as 15 years, the 30-year mortgage offers more affordable monthly 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 building an emergency fund, contributing to retirement or college tuition, or saving for 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.
15-year mortgage moves lower,-0.24%
The average rate you’ll pay for a 15-year fixed mortgage is 6.37 percent, down 24 basis points since the same time last week.
Monthly payments on a 15-year fixed mortgage at that rate will cost around $864 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 quickly.
5/1 ARM rate moves upward, +0.02%
The average rate on a 5/1 adjustable rate mortgage is 6.02 percent, climbing 2 basis points over the last week.
Adjustable-rate mortgages, or ARMs, are mortgage terms that come with a floating interest rate. In other words, 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 refinance or sell 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 6.02 percent would cost about $601 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 declines, -0.22%
The average rate you’ll pay for a jumbo mortgage is 6.98 percent, a decrease of 22 basis points over the last week. This time a month ago, the average rate for jumbo mortgages was lesser, at 6.94 percent.
At today’s average jumbo rate, you’ll pay $663.96 per month in principal and interest for every $100,000 you borrow. Compared with last week, that’s $14.83 lower.
Rate review: How interest rates have shifted over the past week
- 30-year fixed mortgage rate: 6.99%, down from 7.19% last week, -0.20
- 15-year fixed mortgage rate: 6.37%, down from 6.61% last week, -0.24
- 5/1 ARM mortgage rate: 6.02%, up from 6.00% last week, +0.02
- Jumbo mortgage rate: 6.98%, down from 7.20% last week, -0.22
Refinance rates
Current 30 year mortgage refinance rate trends down, –0.15%
The average 30-year fixed-refinance rate is 7.10 percent, down 15 basis points from a week ago. A month ago, the average rate on a 30-year fixed refinance was lower, at 7.01 percent.
At the current average rate, you’ll pay $672.03 per month in principal and interest for every $100,000 you borrow. Compared with last week, that’s $10.15 lower.
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 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.
What are current mortgage rates?
Mortgage rates have been volatile because of the COVID-19 pandemic. Generally, though, rates have been low. Mortgage rates are rising and falling from week to week, as lenders are inundated with forbearance and refinance requests. In general, however, rates are consistently below 4 percent and even dipping below 3%. This is an especially good time for people with good to excellent credit to lock in a low rate for a purchase loan. However, lenders are also raising credit standards for borrowers and demanding higher down payments as they try to dampen their risks.
What comes next:
Featured lenders for today, June 5, 2023
Source: bankrate.com