A variety of significant mortgage rates moved higher over the last seven days. The average interest rates for both 15-year fixed and 30-year fixed mortgages both saw an increase. For variable rates, the average 5/1 adjustable-rate mortgage also rose.
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 30-year fixed-mortgage rate average is 7.01%, which is a growth of 16 basis points compared to one week ago. (A basis point is equivalent to 0.01%.) The most frequently used loan term is a 30-year fixed mortgage. A 30-year fixed rate mortgage will usually have a lower monthly payment than a 15-year one — but usually a higher interest rate. 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 6.31%, which is an increase of 16 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 bigger 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 ARM has an average rate of 5.75%, a climb of 15 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. But since the rate adjusts with the market rate, you could 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 may be significantly higher once the rate adjusts.
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 information 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 US:
Average mortgage interest rates
| Product | Rate | Last week | Change |
|---|---|---|---|
| 30-year fixed | 7.01% | 6.85% | +0.16 |
| 15-year fixed | 6.31% | 6.15% | +0.16 |
| 30-year jumbo mortgage rate | 7.01% | 6.87% | +0.14 |
| 30-year mortgage refinance rate | 7.13% | 6.91% | +0.22 |
Rates as of Feb. 28, 2023.
How to shop for the best mortgage rate
To find a personalized mortgage rate, meet with your local mortgage broker or use an online mortgage service. When shopping around for home mortgage rates, consider your goals and current financial situation.
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. 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 rate, other factors including closing costs, fees, discount points and taxes might also factor into the cost of your house. Be sure to talk to multiple lenders — for example, local and national banks, credit unions and online lenders — and comparison shop to find the best mortgage loan for you.
What is a good loan term?
One important factor to consider when choosing a mortgage is 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 fixed for the duration of the loan. For adjustable-rate mortgages, interest rates are fixed for a certain number of years (typically five, seven or 10 years), then the rate adjusts annually based on the market interest rate.
When deciding between a fixed-rate and adjustable-rate mortgage, you should take into consideration how long you plan to live in your house. Fixed-rate mortgages might be a better fit for those who plan on staying in a home for quite some time. Fixed-rate mortgages offer more stability over time in comparison to adjustable-rate mortgages, but adjustable-rate mortgages may offer lower interest rates upfront. However, you could get a better deal with an adjustable-rate mortgage if you’re only planning to keep your house for a couple years. There is no best loan term as a rule of thumb; 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.
