A variety of important mortgage rates moved up over the last seven days. The average interest rates for both 15-year fixed and 30-year fixed mortgage rates both crept higher. We also saw a rise in the average rate of 5/1 adjustable-rate mortgages.
As inflation surged in 2022, so too did mortgage rates. To rein in price growth, the Federal Reserve began bumping up its federal funds rate — a short-term interest rate that determines what banks charge each other to borrow money. By making it more expensive to borrow, the central bank’s goal is to reduce prices by curtailing consumer spending.
During its July 26 meeting, the Fed initiated a 25-basis point (or 0.25%) hike to its federal funds rate, marking its 11th increase in the current rate hiking cycle. The most recent increase could have an impact on mortgage rates, but experts say the markets may have already factored it into rates.
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.
“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,” said Jacob Channel, senior economist at loan marketplace LendingTree.
The Fed doesn’t set mortgage rates directly, but it does play an influential role. Mortgage rates move around on a daily basis in response to a range of economic factors, including inflation, employment and the broader outlook for the economy. A lower inflation rate is good news for mortgage rates, but the potential for additional hikes from the central bank this year will keep upward pressure on already high rates.
Rather than worrying about mortgage rates, though, homebuyers should focus on what they can control: getting the best rate they can for their financial situation.
To increase your odds at qualifying for the lowest rate available, take the steps necessary to improve your credit score and to save for a down payment. 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 make an apples-to-apples comparison among lenders.
30-year fixed-rate mortgages
The average 30-year fixed mortgage interest rate is 7.59%, which is a growth of 6 basis points compared to 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 often 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 6.81%, which is an increase of 2 basis points from seven days ago. You’ll definitely have a larger 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, as long as you’re able to 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 6.57%, a climb of 1 basis point compared to 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, since the rate changes with the market rate, you might end up paying more after that time, as described in the terms of your loan. If you plan to sell or refinance your house before the rate changes, an adjustable-rate mortgage may make sense for you. But if that’s not the case, you might 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 as the Federal Reserve began aggressively hiking interest rates. Now, mortgage rates are well above where they were a year ago. What does this mean for homebuyers this year?
“Mortgage rates have hovered in the 6% to 7% range for the past 10 months. Though home prices have softened slightly nationally, the still-high cost of borrowing means hopeful home buyers have felt little relief,” said Hannah Jones, economic research analyst at Realtor.com.
However, if inflation continues to decline and the Fed is able to hold rates where they are and eventually cut them, mortgage rates are likely to decrease slightly in 2023. However, they’re highly unlikely to return to the rock-bottom levels of just a few years ago.
The most recent housing forecast from Fannie Mae calls for the average 30-year fixed mortgage rate to close out the year at around 6.6%.
“Mortgage rates have been volatile for some time now and while they could eventually start trending down over the next six months to a year as inflation growth continues to cool, their path is probably going to be bumpy,” Channel said.
We use rates collected by Bankrate to track changes in these daily rates. This table summarizes the average rates offered by lenders nationwide:
Current average mortgage interest rates
|Loan type||Interest rate||A week ago||Change|
|30-year fixed rate||7.59%||7.53%||+0.06|
|15-year fixed rate||6.81%||6.79%||+0.02|
|30-year jumbo mortgage rate||7.62%||7.56%||+0.06|
|30-year mortgage refinance rate||7.78%||7.66%||+0.12|
Rates as of Sept. 12, 2023.
How to find the best mortgage rates
To find a personalized mortgage rate, speak to your local mortgage broker or use an online mortgage service. In order to find the best home mortgage, you’ll need to take into account 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. 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 additional factors such as fees, closing costs, taxes and discount points. Make sure you speak with several different lenders — including 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?
One important factor to consider when choosing a mortgage is 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 the same for a certain amount of time (typically five, seven or 10 years). After that, the rate changes annually based on the market rate.
When deciding between a fixed-rate and adjustable-rate mortgage, you should consider how long you plan to stay in your home. If you plan on living 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. If you don’t plan to keep your new home for more than three to 10 years, though, an adjustable-rate mortgage might give you a better deal. The best loan term is entirely dependent on your situation and goals, so be sure to think about what’s important to you when choosing a mortgage.