A number of important mortgage rates moved higher over the last seven days. The average rates for 15-year fixed and 30-year fixed mortgages both climbed, the latter only slightly. Average rates for 5/1 adjustable-rate mortgages were also boosted.
After hiking interest rates 10 times since March 2022, the Federal Reserve pumped the brakes during its June meeting. The central bank’s benchmark federal funds rate will remain at a range of 5.00% to 5.25% for the time being, although the Fed hasn’t ruled out the possibility of further increases if inflation doesn’t continue to moderate.Â
As long as inflation continues to trend downward, experts say a pause in rate hikes from the Fed could bring some stability to today’s volatile mortgage rate market.
Mortgage rates change every day. Experts recommend shopping around to make sure you’re getting the lowest rate. By entering your information below, you can get a custom quote from one of CNET’s partner lenders.
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.
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. Aside from a brief surge towards the end of May, rates continue to fluctuate in the 6% to 7% range.
Even though the Fed hit pause on rate hikes, mortgage interest rates will continue to fluctuate on a daily basis. That’s because mortgage rates aren’t tied to the federal funds rate in the same way other products are, such as home equity loans and home equity lines of credit, or HELOCs. Mortgage rates respond to a variety of economic factors, including inflation, employment and the broader outlook for the economy.
“Mortgage rates will continue to ebb and flow week to week, but ultimately, I think rates will stick to that 6% to 7% range we’re seeing now,” says Jacob Channel, senior economist at loan marketplace LendingTree. “I don’t anticipate them to spike or even show a sustained spike following this meeting.”
Overall, inflation remains high but has been slowly but consistently falling every month since it peaked in June 2022.
After raising rates rapidly in 2022, the Fed opted for smaller, 25-basis-point increases in its first three meetings of 2023. The decision to hold rates steady on June 14 suggests that inflation is cooling and ongoing rate hikes may no longer be necessary to bring inflation down to the Fed’s 2% target. The central bank is unlikely to cut rates any time soon, but positive signaling from the Fed and cooling inflation may ease some of the upward pressure on mortgage rates.
“Rates are getting to a point of being steady. So, it’s more a question of how long it will take for rates to start ticking back down and when inflation will return to a place where your dollar starts buying a little bit more each month,” said Kevin Williams, founder of Full Life Financial Planning.
However, mortgage rates remain well above where they were a year ago. Fewer buyers are willing to jump into the housing market, driving demand down and causing home prices in some regions to ease, but that’s only part of the home affordability equation.
“Interest rates have been much higher in the past and people bought homes and financed homes at those rates. But it’s been hard for people to react to such a rapid increase in just a short amount of time,” says Daniel Oney, research director at the Texas Real Estate Research Center at Texas A&M University. “Everybody had a target for how much they needed to save in order to go into the housing market, but when interest rates increased, those goal posts moved too.”
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. 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.
“The most important thing is that they find the right home. The second most important thing is obviously to find the most efficient way to finance it,” said Melissa Cohn, regional vice president of William Raveis Mortgage.
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 interest rate for a standard 30-year fixed mortgage is 7.08%, which is a growth of 2 basis points compared to one week ago. (A basis point is equivalent to 0.01%.) Thirty-year fixed mortgages are the most common loan term. A 30-year fixed rate mortgage will usually have a lower monthly payment than a 15-year one — but usually 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 6.47%, which is an increase of 7 basis points compared to a week 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’re able to 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 adjustable-rate mortgage has an average rate of 6.15%, an increase of 9 basis points from the same time last week. You’ll usually 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 changes with the market rate. For borrowers who plan to sell or refinance their house before the rate changes, an adjustable-rate mortgage may be a good option. But if that’s not the case, you could be on the hook for a significantly higher interest rate if the market rates change.
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 rates collected by Bankrate to track changes in these daily rates. This table summarizes the average rates offered by lenders across the US:
Today’s mortgage interest rates
| Loan term | Today’s rate | Last week | Change |
|---|---|---|---|
| 30-year mortgage rate | 7.08% | 7.06% | +0.02 |
| 15-year fixed rate | 6.47% | 6.40% | +0.07 |
| 30-year jumbo mortgage rate | 7.12% | 7.06% | +0.06 |
| 30-year mortgage refinance rate | 7.18% | 7.16% | +0.02 |
Rates as of June 15, 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 researching home mortgage rates, consider your goals and current finances.
A range of factors — including your down payment, credit score, loan-to-value ratio and debt-to-income ratio — will all affect your mortgage interest rate. Having a good credit score, a larger 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 speak with a variety of lenders — like local and national banks, credit unions and online lenders — and comparison shop to find the best mortgage loan for you.
What’s the best loan term?
When picking a mortgage, remember to 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 the same for the duration of the loan. Unlike a fixed-rate mortgage, the interest rates for an adjustable-rate mortgage are only set for a certain amount of time (usually five, seven or 10 years). After that, the rate changes annually based on the current interest rate in the market.
When deciding between a fixed-rate and adjustable-rate mortgage, you should take into consideration how long you plan to stay in your home. Fixed-rate mortgages might be a better fit for those who plan on staying in a home for quite some time. While adjustable-rate mortgages can sometimes offer lower interest rates upfront, fixed-rate mortgages are more stable in the long term. However, you might get a better deal with an adjustable-rate mortgage if you only have plans to keep your house for a few years. There is no best loan term as a general rule; it all depends on your goals and your current financial situation. Be sure to do your research and know what’s most important to you when choosing a mortgage.
Source: CNET
