There has been a slight decline in a few important mortgage rates over the last week, but they remain high compared to a year ago.
Several significant mortgage rates decreased in the past week, including both 15-year and 30-year fixed interest rates. In addition, the rate for the popular 5/1 adjustable-rate mortgage fell as well. For almost a year, mortgage rates had been on the rise until late last year when borrowers experienced some relief. Although these rates have gone down from their peak in late 2022, they are still nearly twice what they were during the pandemic’s record-low rate environment.
As a result of inflation and the Fed’s attempts to curb it in 2022, mortgage rates rose to a 20-year high in late 2022, but now the macroeconomic environment is changing again.
Since June 2022, inflation has been steadily declining each month but remains high. The Fed’s decision to hike 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.
Homebuyers can anticipate a dip in mortgage rates in 2023, though it’s improbable for them to reach the historically low levels observed during 2020 and 2021. However, rate fluctuations could continue for some time until there is an agreement on when the Federal Reserve will end its interest rate hikes. Greg McBride, CFA and chief financial analyst at Bankrate (which is also owned by Red Ventures), advises that we should expect mortgage rates to fluctuate throughout the first half of the year. Nonetheless, he believes that rates will decrease more steadily as we progress through the year.
Instead of worrying about market mortgage rates, homebuyers should focus on what they can control: getting the best rate possible for their circumstances. To increase your chances of qualifying for the lowest rates, improve your credit score and save for a down payment. You should compare rates and fees from multiple lenders to find the best rate. By looking at the annual percentage rate, or APR, you can see the total cost of borrowing and compare
30-year fixed-rate mortgages
Last week’s average 30-year fixed mortgage rate dropped by 14 basis points to 6.94%. The most popular loan term is for a 30-year fixed mortgage, which typically carries a higher interest rate than its 15-year counterpart but results in lower monthly payments. While opting for this type of mortgage means paying more interest in the long run due to the extended payment period, it may be an attractive choice if you want to keep your monthly payments low.
15-year fixed-rate mortgages
Currently, the typical interest rate for a 15-year fixed mortgage is at 6.19%, marking a decline of 9 basis points compared to the prior week. Although a 15-year fixed mortgage with similar loan value and interest rate may necessitate bigger monthly payments than its 30-year counterpart, opting for this option could have numerous advantages. Among them are securing lower interest rates, settling your mortgage quicker, and ultimately incurring less total interest over time if you can manage higher monthly payments.
Mortgages with a 5/1 adjustable rate
The average rate for a 5/1 ARM dropped by one basis point to 5.85% in the last seven days. During the first five years of your mortgage, a 5/1 ARM usually offers a lower interest rate than a fixed-rate mortgage that spans over 30 years. However, it’s important to note that changes in the market can cause your interest rate to increase after this initial period as outlined in your loan terms. If you intend on selling or refinancing before these changes occur, then an ARM may be suitable for you. Otherwise, if market rates shift unfavorably, you could end up paying much more in interest charges.
Mortgage rate trends
The Fed’s recent increase of 0.25% indicates a change in their approach and potentially less aggressive rate hikes next year if inflation decreases. However, inflation remains below the target range of 2%, and Fed officials affirm that more increases will be necessary, albeit smaller ones. Consequently, mortgage rates may decline gradually this year but not significantly enough for borrowers to anticipate a rapid decrease or return to pandemic lows.
This table summarizes the average rates offered by lenders nationwide based on information collected by Bankrate, which is owned by CNET’s parent company.
Average mortgage interest rates
|30-year jumbo mortgage rate
|30-year mortgage refinance rate
When picking a mortgage, it’s crucial to factor in the loan term or payment schedule. The standard options are 15 and 30 years, but you can also find mortgages with terms of 10, 20, and even 40 years. Another key consideration is whether the mortgage has a fixed or adjustable interest rate. With fixed-rate mortgages, the interest rate stays steady for the whole term of the loan. Conversely, an adjustable-rate mortgage locks in your interest rate for only several years (usually five to ten) before adjusting annually based on market trends.