A few significant mortgage rates went higher over the last seven days. The average interest rates for both 15-year fixed and 30-year fixed mortgages both saw increases. We also saw an upward trend in the average rate of 5/1 adjustable-rate mortgages.
After nearly a year of rising mortgage rates, borrowers finally saw some relief late last year. Rates have declined since they hit their peak in late 2022, though current rates remain nearly double what they were during the record-low rate environment of the pandemic.
Inflation, and the series of rate hikes the Federal Reserve implemented in 2022 in an attempt to curb it, contributed in part to the rise in mortgage rates. Mortgage rates hit a 20-year high in late 2022, but now the macroeconomic environment is changing again.
Overall inflation remains high but has been slowly but consistently falling every month since it peaked in June 2022. The Fed’s decision to raise the federal funds rate by 0.25% on Feb. 1 after its latest meeting — the smallest increase since March 2022 — suggests that inflation may be cooling and the central bank may be able to ease up on its rate hikes.
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,” says 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 predicts.
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.
30-year fixed-rate mortgages
The average interest rate for a standard 30-year fixed mortgage is 7.06%, which is an increase of 11 basis points as of seven days ago. (A basis point is equivalent to 0.01%.) Thirty-year fixed mortgages are the most frequently used loan term. A 30-year fixed mortgage will typically have a greater 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 6.28%, which is an increase of 5 basis points from seven days ago. Compared to a 30-year fixed mortgage, a 15-year fixed mortgage with the same loan value and interest rate will have a larger monthly payment. But a 15-year loan will usually be the better deal, if you can afford the monthly payments. These include usually being able to get a lower interest rate, paying off your mortgage sooner, and paying less total interest in the long run.
5/1 adjustable-rate mortgages
A 5/1 adjustable-rate mortgage has an average rate of 5.81%, an uptick of 14 basis points compared to last week. For the first five years, you’ll usually get a lower interest rate with a 5/1 ARM compared to a 30-year fixed mortgage. But since the rate shifts with the market rate, you may end up paying more after that time, as described in the terms of your loan. If you plan to sell or refinance your house before the rate changes, an ARM may make sense for you. If not, shifts in the market may significantly increase your interest rate.
Mortgage rate trends
Mortgage rates were historically low throughout most of 2020 and 2021 but increased steadily throughout 2022. The Federal Reserve raised the target federal funds rate — which influences the cost of most consumer loans, including mortgages — seven times in 2022 in an attempt to curb record-high inflation. Though the Fed doesn’t directly control mortgage rates, higher inflation and a higher federal funds rate tend to lead to higher mortgage rates.
The Fed’s latest 0.25% increase — smaller than its six previous increases of 0.75% or 0.5% — represents a shift in the Fed’s stance and suggests that the central bank might be less aggressive in its rate hikes in 2023 if inflation continues to come down. But inflation is still far from the Fed’s 2% target range and Fed officials have stated repeatedly (PDF) that additional rate hikes — albeit smaller ones — will be necessary. All said, while we may see mortgage rates pull back gradually this year, borrowers shouldn’t expect a sharp drop or a return to pandemic lows.
We use rates collected by Bankrate, which is owned by the same parent company as CNET, to track changes in these daily rates. This table summarizes the average rates offered by lenders nationwide:
Average mortgage interest rates
|30-year jumbo mortgage rate||7.11%||6.97%||+0.14|
|30-year mortgage refinance rate||7.14%||7.03%||+0.11|
Rates as of March 2, 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. In order to find the best home mortgage, you’ll need to take into account your goals and current finances.
A range of factors — including your down payment, credit score, loan-to-value ratio and debt-to-income ratio — will all affect the interest rate on your mortgage. Generally, you want a good credit score, a larger down payment, a lower DTI and a lower LTV to get a lower interest rate.
The interest rate isn’t the only factor that affects the cost of your home. Be sure to also consider other costs such as fees, closing costs, taxes and discount points. Make sure to comparison shop with multiple lenders — including credit unions and online lenders in addition to local and national banks — in order to get a mortgage loan that’s the right fit for you.
What is a good loan term?
When picking a mortgage, you should consider 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. Mortgages are further divided into fixed-rate and adjustable-rate mortgages. For fixed-rate mortgages, interest rates are stable for the life of the loan. Unlike a fixed-rate mortgage, the interest rates for an adjustable-rate mortgage are only the same for a certain amount of time (typically five, seven or 10 years). After that, the rate fluctuates annually based on the current interest rate in the market.
When choosing between a fixed-rate and adjustable-rate mortgage, you should think about how long you plan to stay in your home. Fixed-rate mortgages might be a better fit if you plan on staying in a home for a while. While adjustable-rate mortgages can sometimes offer lower interest rates upfront, fixed-rate mortgages are more stable over time. However, you might get a better deal with an adjustable-rate mortgage if you only intend to keep your home for a few years. There is no best loan term as an overarching rule; it all depends on your goals and your current financial situation. It’s important to do your research and understand what’s most important to you when choosing a mortgage.