Mortgage interest rates increased 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 moved higher.
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 as of March 6, 2023.
These rates are averages 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 Monday, March 6th, 2023 at 7:30 a.m.
>>Check out historical mortgage rate trends, from the 70s to today
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 interest rates
30-year mortgage rate rises, +0.06%
The average 30-year fixed-mortgage rate is 7.08 percent, an increase of 6 basis points since the same time last week. Last month on the 6th, the average rate on a 30-year fixed mortgage was lower, at 6.56 percent.
At the current average rate, you’ll pay principal and interest of $670.68 for every $100k you borrow. Compared to last week, that’s $4.03 higher.
When to consider a 30-year fixed mortgage
Choosing the right home loan is an important step in the homebuying process, and you have a lot of options. You need to take several factors into consideration, including your credit score, income, down payment amount, budget, and financial goals.
15-year mortgage trends upward,+0.03%
The average rate you’ll pay for a 15-year fixed mortgage is 6.33 percent, up 3 basis points from a week ago.
Monthly payments on a 15-year fixed mortgage at that rate will cost roughly $862 per $100,000 borrowed. The bigger payment may be a little harder 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 faster.
5/1 adjustable rate mortgage increases, +0.13%
The average rate on a 5/1 ARM is 5.84 percent, up 13 basis points since the same time last week.
Adjustable-rate mortgages, or ARMs, are mortgage loans 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 mortgages. These types of loans are best for those who expect to refinance or sell before the first or second adjustment. Rates could be considerably 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 5.84 percent would cost about $589 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 loan interest rate increases, +0.09%
The current average rate you’ll pay for jumbo mortgages is 7.13 percent, up 9 basis points over the last week. This time a month ago, the average rate for jumbo mortgages was lower, at 6.62 percent.
At the current average rate, you’ll pay principal and interest of $674.06 for every $100,000 you borrow. That’s $6.07 higher compared with last week.
Summary: How interest rates have changed this week
- 30-year fixed mortgage rate: 7.08%, up from 7.02% last week, +0.06
- 15-year fixed mortgage rate: 6.33%, up from 6.30% last week, +0.03
- 5/1 ARM mortgage rate: 5.84%, up from 5.71% last week, +0.13
- Jumbo mortgage rate: 7.13%, up from 7.04% last week, +0.09
Refinance rates
30-year mortgage refinance rate moves up, +0.05%
The average 30-year fixed-refinance rate is 7.17 percent, up 5 basis points from a week ago. A month ago, the average rate on a 30-year fixed refinance was lower, at 6.66 percent.
At the current average rate, you’ll pay $676.76 per month in principal and interest for every $100,000 you borrow. That’s $3.38 higher compared with last week.
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 different mortgage terms
The 30-year fixed-rate mortgage is the most popular loan for homeowners. This mortgage has a number of advantages. Among them:
- 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.
Are mortgage rates rising or falling?
Mortgage rates have fallen to record lows in recent months. Where they’ll go from here is nearly impossible to predict. The direction of rates depends largely on the direction of the economy. It also depends on how well the coronavirus pandemic is contained. The general consensus: If the economy continues to bounce back, and if drugmakers are successful in developing a vaccine, rates will rise. On the other hand, if the economy struggles because of coronavirus-related setbacks, mortgage rates will remain at record lows or fall even further.
What comes next:
Featured lenders, March 6, 2023
Source: bankrate.com