A few significant mortgage rates increased today. The average interest rates for both 15-year fixed and 30-year fixed mortgages both crept higher. At the same time, average rates for 5/1 adjustable-rate mortgages also were raised.
Mortgage rates have increased fairly consistently since the start of 2022, following in the wake of a series of interest rate hikes by the Federal Reserve. 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, are having an unmistakable impact on mortgage rates.
If you’re looking to buy a home, trying to time the market may not play to your favor. If inflation continues to increase and rates continue to climb, it will likely translate to higher interest rates — and steeper monthly mortgage payments. As such, you may have better luck locking in a lower mortgage interest rate sooner rather than later. 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 average 30-year fixed mortgage interest rate is 6.63%, which is an increase of 12 basis points compared to 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 mortgage will often 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 5.99%, which is an increase of 14 basis points 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, as long as 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 5.50%, a climb of 8 basis points compared to last week. With an ARM mortgage, you’ll usually get a lower interest rate than a 30-year fixed mortgage for the first five years. However, since the rate adjusts with the market rate, you may end up paying more after that time, as described in the terms of your loan. For borrowers who plan to sell or refinance their house before the rate changes, an ARM could be a good option. If not, changes in the market may significantly increase your interest rate.
Mortgage rate trends
Though mortgage rates were historically low at the beginning of 2022, they have been rising steadily since. The Federal Reserve recently raised interest rates by another 0.50 percentage points in an attempt to curb record-high inflation. The Fed has raised rates a total of seven times this year, but inflation still remains high. 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 into 2023, which would likely continue to drive mortgage rates upward.
We use rates collected by Bankrate, which is owned by the same parent company as CNET, to track changes in these daily rates. This table summarizes the average rates offered by lenders across the country:
Average mortgage interest rates
|30-year jumbo mortgage rate||6.59%||6.50%||+0.09|
|30-year mortgage refinance rate||6.72%||6.61%||+0.11|
Rates as of Jan. 3, 2023.
How to find the best mortgage rates
When you are ready to apply for a loan, you can connect with a local mortgage broker or search online. In order to find the best home mortgage, you’ll need to consider your goals and current finances.
Things that affect what mortgage rate you might get 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. Make sure to comparison shop with multiple lenders — including credit unions and online lenders in addition to local and national banks — in order to get a loan that’s best 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. Mortgages are further divided into fixed-rate and adjustable-rate mortgages. The interest rates in a fixed-rate mortgage are fixed 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 (commonly five, seven or 10 years). After that, the rate changes annually based on the market interest rate.
One important factor 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 house. 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 in the long term. However you might get a better deal with an adjustable-rate mortgage if you only plan to keep your house for a few years. The best loan term is entirely dependent on your situation and goals, so be sure to consider what’s important to you when choosing a mortgage.