A few notable mortgage rates went down significantly over the past seven days. The average interest rates for both 15-year fixed and 30-year fixed mortgages were slashed. For variable rates, the 5/1 adjustable-rate mortgage also slid lower.
Mortgage rates have increased fairly consistently since the start of 2022, following in the wake of a series of interest rate hikes by the Federal Reserve. Interest rates are dynamic and unpredictable — at least on a daily or weekly basis — and they respond to a wide variety of economic factors. But the Fed’s actions, designed to mitigate the high rate of inflation, are having an unmistakable impact on mortgage rates.
If you’re looking to buy a home, trying to time the market may not play to your favor. If inflation continues to increase and rates continue to climb, it will likely translate to higher interest rates — and steeper monthly mortgage payments. As such, you may have better luck locking in a lower mortgage interest rate sooner rather than later. No matter when you decide to shop for a home, it’s always a good idea to seek out multiple lenders to compare rates and fees to find the best mortgage for your specific situation.
30-year fixed-rate mortgages
For a 30-year, fixed-rate mortgage, the average rate you’ll pay is 6.47%, which is a decline of 16 basis points compared to one week ago. (A basis point is equivalent to 0.01%.) The most common loan term is a 30-year fixed mortgage. A 30-year fixed mortgage will usually have a greater 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 5.82%, which is a decrease of 19 basis points from the same time last week. 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. However, if you can afford the monthly payments, there are several benefits to a 15-year loan. 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 ARM has an average rate of 5.46%, a downtick of 4 basis points compared to last week. With an adjustable-rate mortgage mortgage, you’ll typically get a lower interest rate than a 30-year fixed mortgage for the first five years. However, you could end up paying more after that time, depending on the terms of your loan and how the rate changes with the market rate. Because of this, an ARM might be a good option if you plan to sell or refinance your house before the rate changes. But if that’s not the case, you might be on the hook for a much higher interest rate if the market rates shift.
Mortgage rate trends
Though mortgage rates were historically low at the beginning of 2022, they have been rising steadily since. The Federal Reserve recently raised interest rates by another 0.50 percentage points in an attempt to curb record-high inflation. The Fed has raised rates a total of seven times this year, but inflation still remains high. As a general rule, when inflation is low, mortgage rates tend to be lower. When inflation is high, rates tend to be higher.
Though the Fed does not directly set mortgage rates, the central bank’s policy actions influence how much you pay to finance your home loan. If you’re looking to buy a house, keep in mind that the Fed has signaled it will continue to raise rates into 2023, which would likely continue to drive mortgage rates upward.
We use rates collected by Bankrate, which is owned by the same parent company as CNET, to track rate changes over time. This table summarizes the average rates offered by lenders across the country:
Average mortgage interest rates
| Product | Rate | Last week | Change |
|---|---|---|---|
| 30-year fixed | 6.47% | 6.63% | -0.16 |
| 15-year fixed | 5.82% | 6.01% | -0.19 |
| 30-year jumbo mortgage rate | 6.45% | 6.63% | -0.18 |
| 30-year mortgage refinance rate | 6.54% | 6.67% | -0.13 |
Rates as of Dec. 20, 2022.
How to find the best mortgage rates
When you are ready to apply for a loan, you can connect with a local mortgage broker or search online. In order to find the best home mortgage, you’ll need to take into account your goals and overall financial situation.
Specific interest rates will vary based on factors including credit score, down payment, debt-to-income ratio and loan-to-value ratio. Having a higher credit score, a higher down payment, a low DTI, a low LTV or any combination of those factors can help you get a lower interest rate.
Besides the mortgage interest rate, other costs including closing costs, fees, discount points and taxes might also factor into the cost of your home. Make sure to comparison shop with multiple lenders — such as credit unions and online lenders in addition to local and national banks — in order to get a mortgage loan that’s the best fit for you.
What’s the best loan term?
When picking a mortgage, remember to 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. Another important distinction is between fixed-rate and adjustable-rate mortgages. For fixed-rate mortgages, interest rates are set for the life of the loan. Unlike a fixed-rate mortgage, the interest rates for an adjustable-rate mortgage are only fixed for a certain amount of time (usually five, seven or 10 years). After that, the rate adjusts annually based on the market rate.
One important factor to think about when deciding between a fixed-rate and adjustable-rate mortgage is how long you plan on living in your house. For people who plan on living long-term in a new house, fixed-rate mortgages may be the better option. While adjustable-rate mortgages might have lower interest rates upfront, fixed-rate mortgages are more stable in the long term. However you may get a better deal with an adjustable-rate mortgage if you only intend to keep your house for a couple years. There is no best loan term as a general rule; it all depends on your goals and your current financial situation. It’s important to do your research and know your own priorities when choosing a mortgage.
