Over the past week, several benchmark mortgage rates slowly moved up. The average interest rates for both 15-year fixed and 30-year fixed mortgages crept up. At the same time, the average rates for 5/1 adjustable-rate mortgages also increased by a hair.
Mortgages hit a 20-year high in late 2022, but now the macroeconomic environment is changing again. Rates dipped significantly in January before climbing back up in February. In March, mortgage rates bumped up around in the 6% range.
The Federal Reserve announced a 25-basis point increase to its benchmark short-term interest rate on March 22. This could have an impact on mortgage rates, but it’s difficult to say just how much for a market already in flux.
Mortgage rates don’t directly track changes to the federal funds rate, but they do respond to inflation — which was at 5.0% in March. Overall, inflation remains high but has been slowly but consistently falling every month since it peaked in June 2022.
After raising rates dramatically in 2022, the Fed opted for smaller, 25-basis-point rate increases in its first two meetings of 2023. The decision to hike by 0.25% on March 22 suggests that inflation is cooling and the central bank may be able to ease up — but not stop — on its rate hikes.
“The one thing we know for sure is that the Fed will raise rates until the rate of inflation gets back down to 2% or thereabouts,” says Melissa Cohn, regional vice president at William Raveis Mortgage
While mortgage rates have dipped a bit from their December 2022 peak, they still aren’t dramatically lower. Fewer buyers are willing to jump into the housing market, driving demand down and causing home prices to ease, but that’s only part of the home affordability equation.
“Compared to a year ago, homebuyers are dealing with much higher cost of ownership due to the combination of higher mortgage rates, persistently high home prices and limited inventory,” says Nathan Anderson, director of consumer lending product management at BMO Harris Bank. “These combined factors hurt affordability.”
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 30-year fixed mortgage interest rate is 6.93%, which is an increase of 6 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 often have a higher interest rate than a 15-year fixed rate mortgage — but also a lower monthly payment. Although you’ll pay more interest over time — you’re paying off your loan over a longer timeframe — if you’re looking for a lower monthly payment, a 30-year fixed mortgage may be a good option.
15-year fixed-rate mortgages
The average rate for a 15-year, fixed mortgage is 6.22%, which is an increase of 6 basis points from seven days ago. You’ll definitely have a higher monthly payment with a 15-year fixed mortgage compared to a 30-year fixed mortgage, even if the interest rate and loan amount are the same. However, if you’re able to afford the monthly payments, there are several benefits to a 15-year loan. You’ll most likely get a lower interest rate, and you’ll pay less interest in total because you’re paying off your mortgage much quicker.
5/1 adjustable-rate mortgages
A 5/1 ARM has an average rate of 5.75%, a climb of 3 basis points compared to a week ago. For the first five years, you’ll usually get a lower interest rate with a 5/1 adjustable-rate mortgage compared to a 30-year fixed mortgage. However, since the rate changes with the market rate, you may end up paying more after that time, as described in the terms of your loan. Because of this, an adjustable-rate mortgage could be a good option if you plan to sell or refinance your house before the rate changes. Otherwise, shifts in the market mean your interest rate might be a good deal higher once the rate adjusts.
Mortgage rate trends
Mortgage rates were historically low throughout most of 2020 and 2021 but increased steadily throughout 2022. Now, mortgage rates are roughly twice what they were a year ago, pushed up by persistently high inflation. That high inflation prompted the Fed to raise its target federal funds rate seven times in 2022. By raising rates, the Fed makes it more expensive to borrow money and more appealing to keep money in savings, suppressing demand for goods and services.
Mortgage interest rates don’t move in lockstep with the Fed’s actions in the same way that, say, rates for a home equity line of credit do. But they do respond to inflation. As a result, cooling inflation data and positive signals from the Fed will influence mortgage rate movement more than the most recent 25-basis-point rate hike.
We use information collected by Bankrate to track changes in these daily rates. This table summarizes the average rates offered by lenders nationwide:
Average mortgage interest rates
| Product | Rate | Last week | Change |
|---|---|---|---|
| 30-year fixed | 6.93% | 6.87% | +0.06 |
| 15-year fixed | 6.22% | 6.16% | +0.06 |
| 30-year jumbo mortgage rate | 7.01% | 6.94% | +0.07 |
| 30-year mortgage refinance rate | 7.05% | 6.97% | +0.08 |
Rates as of April 19, 2023.
How to find personalized mortgage rates
To find a personalized mortgage rate, speak to your local mortgage broker or use an online mortgage service. When looking into home mortgage rates, consider your goals and current financial situation.
Specific mortgage interest rates will vary based on factors including credit score, down payment, debt-to-income ratio and loan-to-value ratio. Generally, you want a good credit score, a higher down payment, a lower DTI and a lower LTV to get a lower interest rate.
Beyond the mortgage rate, other costs including closing costs, fees, discount points and taxes might also factor into the cost of your house. Be sure to comparison shop with multiple lenders — for example, credit unions and online lenders in addition to local and national banks — in order to get a loan that’s the best fit for you.
What’s the best loan term?
When picking a mortgage, you should consider the loan term, or payment schedule. The most common loan terms are 15 years and 30 years, although 10-, 20- and 40-year mortgages also exist. Mortgages are further divided into fixed-rate and adjustable-rate mortgages. The interest rates in a fixed-rate mortgage are the same for the duration of the loan. For adjustable-rate mortgages, interest rates are stable for a certain number of years (typically five, seven or 10 years), then the rate adjusts annually based on the current interest rate in the market.
When choosing between a fixed-rate and adjustable-rate mortgage, you should think about the length of time you plan to live in your house. For people who plan on living long-term in a new house, fixed-rate mortgages may be the better option. Fixed-rate mortgages offer more stability over time compared to adjustable-rate mortgages, but adjustable-rate mortgages can sometimes offer lower interest rates upfront. If you don’t plan to keep your new home for more than three to 10 years, though, an adjustable-rate mortgage could give you a better deal. There is no best loan term as a rule of thumb; it all depends on your goals and your current financial situation. Be sure to do your research and understand what’s most important to you when choosing a mortgage.
