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Mortgage rates charted separate paths this week, but an important rate inched up. Average 15-year fixed mortgage rates receded, while average 30-year fixed mortgage rates moved up. The average rate of the most common type of variable-rate mortgage, the 5/1 adjustable-rate mortgage, remained steady.
The Federal Reserve will hold its May meeting next week to determine whether any further rate hikes will be necessary to tame inflation. If it does proceed with an increase, it’s likely to be the last one in this rate-hiking cycle and will be by just a quarter of a percentage point. After that, the central bank will hold rates where they are for an extended period of time to bring inflation down to its 2% target. But seeing as inflation has been steadily declining each month, there’s a chance that a pause could come as soon as next week.
This could have an impact on mortgage rates, but it’s difficult to say just how much for a market already in flux.
“We’re in one of the most volatile markets in terms of rates since 2008,” says Jennifer Beeston, senior vice president at Guaranteed Rate, a national mortgage lender.
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.
While rates don’t directly track changes to the federal funds rate, they do respond to inflation. Overall, inflation remains high but has been slowly but consistently falling every month since it peaked in June 2022.
After raising rates dramatically in 2022, the Fed opted for smaller, 25-basis-point rate increases in its first two meetings of 2023. The decision to hike by 0.25% on March 22 suggests that inflation is cooling and the central bank may be able to ease up — but not stop — on its rate hikes.
While mortgage rates have dipped a bit from their December 2022 peak, they still aren’t dramatically lower. Fewer buyers are willing to jump into the housing market, driving demand down and causing home prices to ease, but that’s only part of the home affordability equation.
“Even though home prices in many parts of the country have fallen since the start of the year, high rates make buying prohibitively expensive for many,” says Jacob Channel, senior economist at loan marketplace LendingTree. It’s still difficult for many buyers, particularly those looking for their first home, to afford a monthly payment.
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,” says Greg McBride, CFA and chief financial analyst at Bankrate. (Like CNET Money, Bankrate is owned by Red Ventures.) McBride expects rates to fall more consistently as the year progresses. “Thirty-year fixed mortgage rates will end the year near 5.25%,” he predicts.
Rather than worrying about market mortgage rates, homebuyers should focus on what they can control: getting the best rate they can for their situation.
“Instead of getting into the minutiae of what the market’s doing every six seconds, buyers need to focus on what it is they’re really trying to accomplish and have a good game plan,” Beeston says.
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 30-year fixed mortgage interest rate is 6.90%, which is an increase of 2 basis points as of seven days ago. (A basis point is equivalent to 0.01%.) Thirty-year fixed mortgages are the most common loan term. A 30-year fixed mortgage will usually have a higher 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 6.22%, which is a decrease of 3 basis points compared to a week 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. These include typically 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 5.80%, the same rate compared to 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. However, shifts in the market may cause your interest rate to increase after that time, as detailed in the terms of your loan. If you plan to sell or refinance your house before the rate changes, an ARM may make sense for you. If not, changes in the market may significantly increase your interest rate.
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 data collected by Bankrate to track changes in these daily rates. This table summarizes the average rates offered by lenders nationwide:
Average mortgage interest rates
| Product | Rate | Last week | Change |
|---|---|---|---|
| 30-year fixed | 6.90% | 6.88% | +0.02 |
| 15-year fixed | 6.22% | 6.25% | -0.03 |
| 30-year jumbo mortgage rate | 6.98% | 6.93% | +0.05 |
| 30-year mortgage refinance rate | 7.03% | 7.04% | -0.01 |
Rates as of April 28, 2023.
How to find the best mortgage rates
When you are ready to apply for a loan, you can reach out to a local mortgage broker or search online. Make sure to consider your current finances and your goals when searching for a mortgage.
Things that affect the mortgage rate you might get include: your credit score, down payment, loan-to-value ratio and your debt-to-income ratio. Generally, you want a good credit score, a larger down payment, a lower DTI and a lower LTV to get a lower interest rate.
Aside from the interest rate, factors including closing costs, fees, discount points and taxes might also impact the cost of your house. You should talk to a variety of 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?
When picking a mortgage, you should 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 stable for the duration of the loan. For adjustable-rate mortgages, interest rates are fixed for a certain number of years (typically five, seven or 10 years), then the rate fluctuates annually based on the market rate.
When deciding between a fixed-rate and adjustable-rate mortgage, you should think about how long you plan to stay in your house. Fixed-rate mortgages might be a better fit for those who plan on staying in a home for a while. Fixed-rate mortgages offer greater stability over time compared to adjustable-rate mortgages, but adjustable-rate mortgages might offer lower interest rates upfront. If you don’t plan to keep your new house for more than three to 10 years, though, an adjustable-rate mortgage may give you a better deal. There is no best loan term as a general rule; it all depends on your goals and your current financial situation. Make sure to do your research and understand your own priorities when choosing a mortgage.
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