Mortgage rates followed a split path over the last seven days. While the average 15-year fixed mortgage rates floated higher, average 30-year fixed mortgage rates stayed flat. We also saw a rise in the average rate of 5/1 adjustable-rate mortgages.
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. Ahead of the Federal Reserve's May meeting, rates continue to bump around in the 6% range.
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. 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," said Jennifer Beeston, senior vice president at Guaranteed Rate, a national mortgage lender.
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.
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," said 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," said 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 said.
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 6 seconds, buyers need to focus on what it is they're really trying to accomplish and have a good game plan," Beeston said.
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 30-year fixed mortgage interest rate is 6.89%, which is unchanged from seven days ago. (A basis point is equivalent to 0.01%.) Thirty-year fixed mortgages are the most frequently used loan term. A 30-year fixed rate mortgage will usually have a smaller monthly payment than a 15-year one -- but typically 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 6.27%, which is an increase of 10 basis points from seven days ago. You'll definitely have a higher 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. You'll most likely 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 5.81%, an increase of 10 basis points compared to last week. You'll typically get a lower interest rate (compared to a 30-year fixed mortgage) with a 5/1 adjustable-rate mortgage in the first five years of the mortgage. However, 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. For borrowers who plan to sell or refinance their house before the rate changes, an ARM could be a good option. If not, changes in the market might significantly increase your interest rate.
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 changes in these daily rates. This table summarizes the average rates offered by lenders nationwide:
Today's mortgage interest rates
Rates as of April 24, 2023.
How to find personalized mortgage rates
To find a personalized mortgage rate, talk to your local mortgage broker or use an online mortgage service. When looking into home mortgage rates, think about your goals and current finances.
Specific interest rates will vary based on factors including credit score, down payment, debt-to-income ratio and loan-to-value ratio. Having a good 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.
The interest rate isn't the only factor that affects the cost of your home. Be sure to also consider additional factors such as fees, closing costs, taxes and discount points. Be sure to shop around with multiple lenders -- such as credit unions and online lenders in addition to local and national banks -- in order to get a mortgage that works best for you.
How does the loan term impact my mortgage?
One important consideration 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. For fixed-rate mortgages, interest rates are set for the life of the loan. For adjustable-rate mortgages, interest rates are fixed for a certain number of years (most frequently five, seven or 10 years), then the rate adjusts annually based on the market rate.
One important factor to consider when deciding between a fixed-rate and adjustable-rate mortgage is how long you plan on staying in your house. If you plan on living long-term in a new house, fixed-rate mortgages may be the better option. While adjustable-rate mortgages can sometimes offer lower interest rates upfront, fixed-rate mortgages are more stable over time. If you don't have plans to keep your new house for more than three to 10 years, though, an adjustable-rate mortgage may give you a better deal. There is no best loan term as a rule of thumb; it all depends on your goals and your current financial situation. Make sure to do your research and understand what's most important to you when choosing a mortgage.