A variety of significant mortgage rates increased over the last seven days. The average interest rates for both 15-year fixed and 30-year fixed mortgages both rose. For variable rates, the 5/1 adjustable-rate mortgage also ticked up.
Mortgage rates increased dramatically in 2022, as the Federal Reserve hiked interest rates repeatedly throughout the year. Interest rates are dynamic and unpredictable — at least on a daily or weekly basis — and they 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. Though higher rates are likely to here to stay, the biggest increases may be behind us. That noted, trying to time the market is tricky. If inflation persists, more interest rate hikes could follow. As such, you may have better luck locking in a lower mortgage interest rate now instead of waiting; after all, you can always refinance later on. No matter when you decide to shop for a home, it’s always a good idea to seek out multiple lenders to compare rates and fees to find the best mortgage for your specific situation.
30-year fixed-rate mortgages
The 30-year fixed-mortgage rate average is 6.45%, which is a growth of 8 basis points from one week ago. (A basis point is equivalent to 0.01%.) The most common loan term is a 30-year fixed mortgage. A 30-year fixed rate mortgage will usually have a smaller monthly payment than a 15-year one — but often 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 5.63%, which is an increase of 1 basis point from the same time last week. 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. You’ll typically 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 5.42%, an uptick of 4 basis points from seven days 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. However, you might end up paying more after that time, depending on the terms of your loan and how the rate adjusts with the market rate. For borrowers who plan to sell or refinance their house before the rate changes, an adjustable-rate mortgage might be a good option. But if that’s not the case, you may be on the hook for a significantly higher interest rate if the market rates shift.
Mortgage rate trends
Mortgage rates were historically low at the beginning of 2022 but rose steadily throughout the year. The Federal Reserve raised interest rates seven times in an attempt to curb record-high inflation. As a general rule, when inflation is low, mortgage rates tend to be lower. When inflation is high, rates tend to be higher.
Though the Fed does not directly set mortgage rates, the central bank’s policy actions influence how much you pay to finance your home loan. If you’re looking to buy a house, keep in mind that the Fed has signaled it will continue to raise rates in 2023, and that those increases may drive mortgage rates even higher.
We use rates collected by Bankrate, which is owned by the same parent company as CNET, to track rate changes over time. This table summarizes the average rates offered by lenders nationwide:
Today’s mortgage interest rates
Rates as of Jan. 27, 2023.
How to find personalized mortgage rates
To find a personalized mortgage rate, meet with your local mortgage broker or use an online mortgage service. When researching home mortgage rates, consider your goals and current finances.
Things that affect what 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. Having a higher credit score, a higher 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. You should talk to several different lenders — like local and national banks, credit unions and online lenders — and comparison-shop to find the best mortgage for you.
What’s the best loan term?
One important thing you should consider 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. Mortgages are further divided into fixed-rate and adjustable-rate mortgages. For fixed-rate mortgages, interest rates are set for the life of the loan. For adjustable-rate mortgages, interest rates are the same for a certain number of years (usually five, seven or 10 years), then the rate fluctuates annually based on the market interest rate.
When deciding between a fixed-rate and adjustable-rate mortgage, you should consider the length of time you plan to stay in your house. If you plan on living long-term in a new house, fixed-rate mortgages may be the better option. Fixed-rate mortgages offer greater stability over time in comparison to adjustable-rate mortgages, but adjustable-rate mortgages can sometimes offer lower interest rates upfront. However you might get a better deal with an adjustable-rate mortgage if you’re only planning to keep your house 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. Be sure to do your research and understand what’s most important to you when choosing a mortgage.