Some closely followed mortgage rates tailed off over the last seven days. Fifteen-year fixed and 30-year fixed mortgage rates both dwindled. The average rate of the most common type of variable-rate mortgage, the 5/1 adjustable-rate mortgage, also were down.
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.
“We’re in one of the most volatile markets in terms of rates since 2008,” says Jennifer Beeston, senior vice president at Guaranteed Rate, a national mortgage lender.
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.
While rates don’t directly track changes to the federal funds rate, they do respond to inflation. 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.
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.
“Even though home prices in many parts of the country have fallen since the start of the year, high rates make buying prohibitively expensive for many,” says Jacob Channel, senior economist at loan marketplace LendingTree. It’s still difficult for many buyers, particularly those looking for their first home, to afford a monthly payment.
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.
“Instead of getting into the minutiae of what the market’s doing every six seconds, buyers need to focus on what it is they’re really trying to accomplish and have a good game plan,” Beeston says.
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 6.81%, which is a decrease of 16 basis points from 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 rate mortgage will usually have a smaller monthly payment than a 15-year one — but usually a higher interest rate. 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 6.04%, which is a decrease of 14 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, as long as you’re able to afford the monthly payments. You’ll typically 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 5.72%, a decrease of 4 basis points from seven days ago. With an ARM mortgage, you’ll typically get a lower interest rate than a 30-year fixed mortgage for the first five years. However, you might end up paying more after that time, depending on the terms of your loan and how the rate adjusts with the market rate. If you plan to sell or refinance your house before the rate changes, an adjustable-rate mortgage might make sense for you. But if that’s not the case, you might be on the hook for a much higher interest rate if the market rates change.
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 daily mortgage rate trends. This table summarizes the average rates offered by lenders across the US:
Current average mortgage interest rates
| Loan type | Interest rate | A week ago | Change |
|---|---|---|---|
| 30-year fixed rate | 6.81% | 6.97% | -0.16 |
| 15-year fixed rate | 6.04% | 6.18% | -0.14 |
| 30-year jumbo mortgage rate | 6.86% | 6.96% | -0.10 |
| 30-year mortgage refinance rate | 6.87% | 7.03% | -0.16 |
Rates as of March 27, 2023.
How to find the best mortgage rates
To find a personalized mortgage rate, speak to your local mortgage broker or use an online mortgage service. Make sure to think about your current finances and your goals when trying to find a mortgage.
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 larger down payment, a low DTI, a low LTV or any combination of those factors can help you 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 you talk to several different lenders — such as local and national banks, credit unions and online lenders — and comparison shop to find the best mortgage loan for you.
What’s the best loan term?
When picking a mortgage, it’s important to consider the loan term, or payment schedule. The most common mortgage 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 the same for the life of the loan. Unlike a fixed-rate mortgage, the interest rates for an adjustable-rate mortgage are only set for a certain amount of time (most frequently five, seven or 10 years). After that, the rate changes annually based on the current interest rate in the market.
One important factor to consider when choosing between a fixed-rate and adjustable-rate mortgage is how long you plan on living in your home. Fixed-rate mortgages might be a better fit if you plan on staying in a home for a while. Fixed-rate mortgages offer greater stability over time compared to adjustable-rate mortgages, but adjustable-rate mortgages may offer lower interest rates upfront. If you don’t have plans to keep your new house for more than three to 10 years, however, an adjustable-rate mortgage could give you a better deal. There is no best loan term as a general rule; it all depends on your goals and your current financial situation. Make sure to do your research and know what’s most important to you when choosing a mortgage.
