Mortgage Rates for Feb. 1, 2023: Rates Decline
A handful of principal mortgage rates trended lower over the last week. Average 15-year fixed mortgage rates grew, while average 30-year fixed mortgage rates shrank. At the same time, average rates for 5/1 adjustable-rate mortgages dropped lower.
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 6.38%, which is a decline of 5 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 5.70%, which is an increase of 4 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 if you can 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 ARM has an average rate of 5.43%, a downtick of 2 basis points from the same time last week. For the first five years, you’ll usually get a lower interest rate with a 5/1 adjustable-rate mortgage compared to a 30-year fixed mortgage. But since the rate shifts with the market rate, you might 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 adjustable-rate mortgage could be a good option. Otherwise, changes in the market mean your interest rate might be significantly higher once the rate adjusts.
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 rates collected by Bankrate, which is owned by the same parent company as CNET, to track changes in these daily rates. This table summarizes the average rates offered by lenders across the country:
Average mortgage interest rates
|30-year jumbo mortgage rate||6.39%||6.46%||-0.07|
|30-year mortgage refinance rate||6.42%||6.51%||-0.09|
Rates as of Feb. 1, 2023.
How to find the best mortgage rates
You can get a personalized mortgage rate by reaching out to your local mortgage broker or using an online calculator. When shopping around for home mortgage rates, consider your goals and current finances.
Things that affect what mortgage rate you might get include: your credit score, down payment, loan-to-value ratio and your debt-to-income ratio. Having a higher 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 other costs such as fees, closing costs, taxes and discount points. You should speak with 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?
When picking a mortgage, you should consider the loan term or payment schedule. The mortgage 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. 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 fixed for a certain amount of time (usually five, seven or 10 years). After that, the rate fluctuates annually based on the market rate.
One important factor to take into consideration when deciding between a fixed-rate and adjustable-rate mortgage is the length of time you plan on living in your house. If you plan on living long-term in a new house, fixed-rate mortgages may be the better option. Fixed-rate mortgages offer more stability over time compared to adjustable-rate mortgages, but adjustable-rate mortgages can sometimes offer lower interest rates upfront. However, you may get a better deal with an adjustable-rate mortgage if you only have plans to keep your home for a couple of years. There is no best loan term as an overarching rule; it all depends on your goals and your current financial situation. It’s important to do your research and understand your own priorities when choosing a mortgage.