Some principal mortgage rates rose over the last seven days. The average 15-year fixed and 30-year fixed mortgage rates both moved higher. For variable rates, the 5/1 adjustable-rate mortgage also floated higher.
In March 2022, the Federal Reserve stepped in to combat surging inflation by hiking its key interest rate. Mortgage rates, which are not set by the central bank but are indirectly influenced by rate hikes, increased alongside.
After hiking interest rates 11 times since March 2022, the Federal Reserve opted to skip another increase during its September meeting. However, the Fed hasn’t ruled out the possibility of additional increases if inflation doesn’t continue to moderate.
About these rates: Like CNET, Bankrate is owned by Red Ventures. This tool features partner rates from lenders that you can use when comparing multiple mortgage rates.
While inflation has dropped from its record highs, it’s still above target. That means the Fed could continue to raise rates as it sees fit to increase the cost of borrowing and slow down the economy.
Progress on inflation and other key economic indicators may ease some of the upward pressure on mortgage rates. But, if future inflation data comes in hotter than expected and the Fed chooses to hike rates further, mortgage rates could. keep going up in 2023.
Fluctuations in the mortgage and housing markets are always going to happen. That’s why experts say it’s a good idea for homebuyers to focus on what they can control: getting the best rate for their financial situation.
To increase your odds of qualifying for the lowest rate available, take steps to improve your credit score and save for a down payment. Also, be sure to look at the annual percentage rate, or APR, which reflects the mortgage interest rate plus other borrowing charges. By looking at the total cost of borrowing from multiple lenders, you can make a more accurate apples-to-apples comparison.
30-year fixed-rate mortgages
For a 30-year, fixed-rate mortgage, the average rate you’ll pay is 7.78%, which is an increase of 19 basis points from one week ago. (A basis point is equivalent to 0.01%.) Thirty-year fixed mortgages are the most frequently used loan term. A 30-year fixed mortgage will typically have a higher interest rate than a 15-year fixed rate mortgage — but also a lower monthly payment. You won’t be able to pay off your house as quickly and you’ll pay more interest over time, but a 30-year fixed mortgage is a good option if you’re looking to minimize your monthly payment.
15-year fixed-rate mortgages
The average rate for a 15-year, fixed mortgage is 6.89%, which is an increase of 8 basis points compared to a week ago. Compared to a 30-year fixed mortgage, a 15-year fixed mortgage with the same loan value and interest rate will have a higher 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 adjustable-rate mortgage has an average rate of 6.65%, an addition of 11 basis points compared to a week ago. 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. But you may end up paying more after that time, depending on the terms of your loan and how the rate shifts 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, 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 as the Federal Reserve began aggressively hiking interest rates. The top question is what the rest of 2023 has in store for prospective homebuyers.
“Today’s high mortgage rates are not the only challenge we have in the current market,” said Erin Sykes, chief economist at Nest Seekers International. “The combination of high interest rates plus sustained property prices and persistent inflation are making day-to-day life more expensive.”
While experts say mortgage rates are unlikely to return to the rock-bottom levels in the early pandemic, there’s a good chance we could see mortgage rates dip before the end of the year.
In order for that to happen, though, Sykes says we need to see inflation pull back on a consistent basis for at least four to six readings. If the federal funds rate remains steady, that should also help stabilize mortgage rates going into 2024.
Fannie Mae calls for the average 30-year fixed mortgage rate to close out the year at 7.1%.
We use rates collected by Bankrate to track daily mortgage rate trends. This table summarizes the average rates offered by lenders nationwide:
Average mortgage interest rates
|30-year jumbo mortgage rate||7.81%||7.63%||+0.18|
|30-year mortgage refinance rate||7.92%||7.78%||+0.14|
Rates as of Sept. 27, 2023.
How to shop for the best mortgage rate
When you are ready to apply for a loan, you can reach out to a local mortgage broker or search online. When looking into home mortgage rates, take into account your goals and current financial situation.
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 factors such as fees, closing costs, taxes and discount points. Be sure to speak with several different lenders — such as local and national banks, credit unions and online lenders — and comparison shop to find the best loan for you.
What’s the best loan term?
One important thing to keep in mind 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 fixed for the duration of the loan. For adjustable-rate mortgages, interest rates are the same for a certain number of years (commonly five, seven or 10 years), then the rate adjusts annually based on the market rate.
When deciding between a fixed-rate and adjustable-rate mortgage, you should think about how long you plan to stay in your house. If you plan on staying 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 over time. However, you may get a better deal with an adjustable-rate mortgage if you’re only planning to keep your home for a few years. There is no best loan term as a rule of thumb; it all depends on your goals and your current financial situation. It’s important to do your research and understand what’s most important to you when choosing a mortgage.