Apache is functioning normally
National mortgage 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 rose.
After increasing interest rates at 10 consecutive meetings in 2022 and 2023, the Federal Reserve finally paused at its June 14 meeting — only to resume July 26, with a one-quarter percentage point increase.
The headline inflation number has fallen to 3 percent, near the Fed’s official goal of 2 percent, and housing economists say the end is near for the central bank’s intense fight against inflation.
“We do expect mortgage rates to trend down once the [Federal Open Market Committee] clearly signals that they have reached the peak for this cycle, as the reduction in uncertainty with respect to the direction of rates should narrow the spread of mortgage rates relative to Treasury benchmarks,” says Mike Fratantoni, chief economist at the Mortgage Bankers Association.
Rates last updated on August 7, 2023.
The rates listed above 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, August 7th, 2023 at 7:30 a.m.
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
30-year fixed-rate mortgage climbs, +0.11%
The average rate you’ll pay for a 30-year fixed mortgage is 7.38 percent, an increase of 11 basis points over the last week. This time a month ago, the average rate on a 30-year fixed mortgage was lower, at 7.37 percent.
At the current average rate, you’ll pay a combined $691.02 per month in principal and interest for every $100k you borrow. That’s an additional $7.49 per $100,000 compared to last week.
15-year mortgage increases,+0.07%
The average 15-year fixed-mortgage rate is 6.63 percent, up 7 basis points from a week ago.
Monthly payments on a 15-year fixed mortgage at that rate will cost approximately $878 per $100,000 borrowed. That may squeeze your monthly budget than a 30-year mortgage would, but it comes with some big advantages: You’ll save thousands of dollars over the life of the loan in total interest paid and build equity much faster.
5/1 ARM rate climbs, +0.07%
The average rate on a 5/1 adjustable rate mortgage is 6.36 percent, ticking up 7 basis points over the last 7 days.
Adjustable-rate mortgages, or ARMs, are home loans 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 mortgages. These types of loans are best for those who expect to sell or refinance 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 6.36 percent would cost about $623 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 rate advances, +0.11%
The average rate you’ll pay for a jumbo mortgage is 7.41 percent, an increase of 11 basis points over the last seven days. This time a month ago, the average rate was below that, at 7.39 percent.
At the current average rate, you’ll pay principal and interest of $693.06 for every $100,000 you borrow. That’s an extra $7.49 compared with last week.
Recap: How interest rates have shifted
- 30-year fixed mortgage rate: 7.38%, up from 7.27% last week, +0.11
- 15-year fixed mortgage rate: 6.63%, up from 6.56% last week, +0.07
- 5/1 ARM mortgage rate: 6.36%, up from 6.29% last week, +0.07
- Jumbo mortgage rate: 7.41%, up from 7.30% last week, +0.11
Interested in refinancing? See mortgage refinance rates
30-year mortgage refinance stays put
The average 30-year fixed-refinance rate is 7.40 percent, unchanged over the last week. A month ago, the average rate on a 30-year fixed refinance was higher, at 7.44 percent.
At the current average rate, you’ll pay $692.38 per month in principal and interest for every $100,000 you borrow.
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.
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Source: bankrate.com