Mortgage rates this week went in a mixture of directions, but an important rate is now higher. Average 15-year fixed mortgage rates trailed off, while average 30-year fixed mortgage rates are higher. The average rate of the most common type of variable-rate mortgage, the 5/1 adjustable-rate mortgage, declined.
Mortgage rates increased dramatically in 2022, as the Federal Reserve hiked interest rates repeatedly throughout the year. 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, had an unmistakable impact on mortgage rates.
The outlook for 2023 remains uncertain. Though higher rates are likely here to stay, the biggest increases may be behind us. That noted, trying to time the market is tricky. If inflation persists, more interest rate hikes could follow. As such, you may have better luck locking in a lower mortgage interest rate now instead of waiting; after all, you can always refinance later on. 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
The average 30-year fixed mortgage interest rate is 6.37%, which is a growth of 6 basis points compared to one week ago. (A basis point is equivalent to 0.01%.) Thirty-year fixed mortgages are the most common loan term. A 30-year fixed rate mortgage will usually have a lower 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 5.62%, which is a decrease of 6 basis points from seven days ago. You'll definitely have a bigger 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. But a 15-year loan will usually be the better deal, as long as you're able to 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 adjustable-rate mortgage has an average rate of 5.38%, a downtick of 9 basis points from the same time last week. With an ARM mortgage, you'll usually get a lower interest rate than a 30-year fixed mortgage for the first five years. However, shifts in the market may cause your interest rate to increase after that time, as detailed in the terms of your loan. For borrowers who plan to sell or refinance their house before the rate changes, an adjustable-rate mortgage may be a good option. If not, changes in the market may significantly increase your interest rate.
Mortgage rate trends
Mortgage rates were historically low at the beginning of 2022 but rose steadily throughout the year. The Federal Reserve raised interest rates seven times in an attempt to curb record-high inflation. 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 in 2023, and that those increases may drive mortgage rates even higher.
We use information collected by Bankrate, which is owned by the same parent company as CNET, to track daily mortgage rate trends. This table summarizes the average rates offered by lenders across the country:
Average mortgage interest rates
|30-year jumbo mortgage rate||6.37%||6.28%||+0.09|
|30-year mortgage refinance rate||6.48%||6.32%||+0.16|
Rates as of Jan. 20, 2023.
How to shop for the best mortgage rate
To find a personalized mortgage rate, talk to your local mortgage broker or use an online mortgage service. In order to find the best home mortgage, you'll need to consider your goals and current finances.
Things that affect the interest rate you might get on your mortgage include: your credit score, down payment, loan-to-value ratio and your debt-to-income ratio. Generally, you want a higher credit score, a larger down payment, a lower DTI and a lower LTV to 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. Be sure to talk to several different lenders -- for example, local and national banks, credit unions and online lenders -- and comparison shop to find the best mortgage for you.
How does the loan term impact my mortgage?
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. Another important distinction is between fixed-rate and adjustable-rate mortgages. The interest rates in a fixed-rate mortgage are set for the duration of the loan. Unlike a fixed-rate mortgage, the interest rates for an adjustable-rate mortgage are only the same for a certain amount of time (usually five, seven or 10 years). After that, the rate fluctuates 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 stay 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 plan to keep your house for a couple of years. The best loan term is entirely dependent on your personal situation and goals, so be sure to think about what's important to you when choosing a mortgage.