While a closely followed mortgage rate decreased, rates took a split path over the last seven days. While average 15-year fixed mortgage rates remained unchanged, average interest rates on 30-year fixed mortgages retracted. The average rate of the most common type of variable-rate mortgage, the 5/1 adjustable-rate mortgage, inched up.
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 7.05%, which is a decline of 7 basis points from seven days 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 typically have a greater 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 6.33%, which is the same rate as 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 bigger monthly payment. But a 15-year loan will usually be the better deal, if you can 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 5.87%, a climb of 4 basis points from this time last week. You’ll usually get a lower interest rate (compared to a 30-year fixed mortgage) with a 5/1 ARM in the first five years of the mortgage. However, changes in the market could cause your interest rate to increase after that time, as detailed in the terms of your loan. 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. 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 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:
Today’s mortgage interest rates
Rates as of March 10, 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. Make sure to think about your current finances and your goals when searching for a mortgage.
Specific mortgage rates will vary based on factors including credit score, down payment, debt-to-income ratio and loan-to-value ratio. Generally, you want a higher credit score, a higher down payment, a lower DTI and a lower LTV to get a lower interest rate.
Beyond the mortgage interest rate, additional costs including closing costs, fees, discount points and taxes might also affect the cost of your home. You should 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 loan that’s the best fit for you.
What is a good loan term?
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. Another important distinction is between fixed-rate and adjustable-rate mortgages. The interest rates in a fixed-rate mortgage are stable for the duration of the loan. Unlike a fixed-rate mortgage, the interest rates for an adjustable-rate mortgage are only stable for a certain amount of time (usually five, seven or 10 years). After that, the rate fluctuates annually based on the market rate.
One thing to take into consideration when choosing between a fixed-rate and adjustable-rate mortgage is the length of time you plan on living in your home. For those who plan on staying 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 home 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 think about your own priorities when choosing a mortgage.
