A variety of notable mortgage rates went down over the last seven days. The average interest rates for both 15-year fixed and 30-year fixed mortgages fell. At the same time, average rates for 5/1 adjustable-rate mortgages also sagged.
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 average 30-year fixed mortgage interest rate is 6.96%, which is a decline of 15 basis points from 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 mortgage will usually have a greater interest rate than a 15-year fixed rate mortgage -- but also a lower monthly payment. 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 a decrease of 3 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. However, as long as you're able to afford the monthly payments, there are several benefits to a 15-year loan. 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 5.80%, a fall of 7 basis points from the same time 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, you may end up paying more after that time, depending on the terms of your loan and how the rate changes with the market rate. Because of this, an ARM might be a good option if you plan to sell or refinance your house before the rate changes. If not, shifts in the market could significantly increase your interest rate.
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 data 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 country:
Today's mortgage interest rates
|Loan term||Today's Rate||Last week||Change|
|30-year mortgage rate||6.96%||7.11%||-0.15|
|15-year fixed rate||6.27%||6.30%||-0.03|
|30-year jumbo mortgage rate||6.96%||7.16%||-0.20|
|30-year mortgage refinance rate||6.97%||7.08%||-0.11|
Rates as of March 15, 2023.
How to find the best mortgage rates
To find a personalized mortgage rate, meet with 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 mortgage rate you might get include: your credit score, down payment, loan-to-value ratio and your debt-to-income ratio. Generally, you want a good 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 additional factors such as fees, closing costs, taxes and discount points. You should shop around with multiple lenders -- including credit unions and online lenders in addition to local and national banks -- in order to get a mortgage that's best for you.
What is a good loan term?
One important thing you should consider when choosing a mortgage is the loan term, or payment schedule. The loan terms most commonly offered are 15 years and 30 years, although you can also find 10-, 20- and 40-year mortgages. Mortgages are further divided into fixed-rate and adjustable-rate mortgages. The interest rates in a fixed-rate mortgage are the same 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.
One factor to take into consideration when deciding between a fixed-rate and adjustable-rate mortgage is how long you plan on living 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 may offer 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're only planning to keep your house for a few years. The best loan term depends on your specific situation and goals, so be sure to consider what's important to you when choosing a mortgage.