Mortgage rates today went in a mixed bag, but one important rate is now higher. Average 15-year fixed mortgage rates are down, while average 30-year fixed mortgage rates are higher. The average rate on the most common type of variable rate mortgage, the 5/1 adjustable rate mortgage, has decreased.
Mortgage rates rose dramatically in 2022 as the Federal Reserve raised interest rates repeatedly throughout the year. Interest rates are dynamic and unpredictable, at least on a daily or weekly basis, and 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. While the higher rates are likely to be here to stay, the biggest increases may be behind us. That being said, trying to time the market is tricky. If inflation persists, further interest rate hikes could follow. As such, you may have better luck securing a lower mortgage interest rate now rather than wait; after all, you can always refinance later. No matter when you decide to buy a home, it’s always a good idea to research several 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 6.37%, which represents a growth of 6 basis points compared to a week ago. (One basis point equals 0.01%). 30-year fixed mortgages are the most common loan term. A 30-year fixed-rate mortgage will typically have a lower monthly payment than a 15-year mortgage, but typically a higher interest rate. Although you’ll pay more in interest over time (you’re paying off your loan over a longer term), 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 5.62%, which represents a 6 basis point decrease from seven days ago. You will 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 best deal, as long as you can afford the monthly payments. These typically include 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 5.38%, a 9 basis point decrease from the same time last week. With an ARM, you’ll generally get a lower interest rate than a 30-year fixed mortgage for the first five years. However, changes in the market may cause your interest rate to increase after that time, as detailed in the terms of your loan. For borrowers who plan to sell or refinance their home before the rate changes, an adjustable rate mortgage may be a good option. Otherwise, changes in the market can significantly increase your interest rate.
Mortgage Rate Trends
Mortgage rates were historically low at the beginning of 2022, but have risen steadily throughout the year. The Federal Reserve raised interest rates seven times in an attempt to curb record inflation. As a general rule, when inflation is low, mortgage rates tend to be lower. When inflation is high, rates tend to be higher.
Although the Federal Reserve does not directly set mortgage rates, the policy actions of the central bank influence how much you pay to finance your home loan. If you’re looking to buy a home, keep in mind that the Federal Reserve has signaled that it will continue to raise rates in 2023, and that those increases may push mortgage rates even higher.
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:
Average Mortgage Interest Rates
|30 years fixed||6.37%||6.31%||+0.06|
|15 years fixed||5.62%||5.68%||-0.06|
|Jumbo 30-Year Mortgage Rate||6.37%||6.28%||+0.09|
|30-Year Mortgage Refinance Rate||6.48%||6.32%||+0.16|
Rates as of January 20, 2023.
How to find the best mortgage rate
To find a personalized mortgage rate, talk to your local mortgage broker or use an online mortgage service. To find the best home mortgage, you’ll need to consider your current finances and goals.
Things that affect the interest rate you might get on your mortgage include: your credit score, down payment, loan-to-value ratio, and debt-to-income ratio. Typically, 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 is not the only factor that affects the cost of your house; Be sure to consider other costs as well, such as fees, closing costs, taxes, and discount points. Be sure to talk to several different lenders, such as local and national banks, credit unions, and online lenders, and shop around to find the best mortgage for you.
How does the term of the loan affect my mortgage?
An important factor to consider when choosing a mortgage is the loan term or payment schedule. The most common loan terms are 15 and 30 years, although there are also 10, 20 and 40-year mortgages. Another important distinction is between fixed rate and adjustable rate mortgages. Interest rates on a fixed-rate mortgage are set for the life of the loan. Unlike a fixed-rate mortgage, the interest rates on an adjustable-rate mortgage only stay the same for a certain period of time (usually five, seven, or 10 years). After that, the rate fluctuates annually based on the market interest rate.
When deciding between a fixed-rate or adjustable-rate mortgage, you should consider how long you plan to stay in your home. For people who plan to live long-term in a new home, fixed-rate mortgages may be the best option. While adjustable-rate mortgages may have lower interest rates up front, fixed-rate mortgages are more stable over the long term. However, you may get a better deal with an adjustable-rate mortgage if you only plan to keep your home for a couple of years. The best loan term depends entirely on your personal situation and goals, so be sure to think about what’s important to you when choosing a mortgage.