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Interest rates on some prime mortgages have climbed upwards over the last seven days. Average 15-year fixed and 30-year fixed mortgage rates both increased. We also saw an upward trend in the average rate of 5/1 adjustable rate mortgages.
Mortgage rates, which were historically low throughout much of 2020 and 2021, have risen steadily since 2022, when the Federal Reserve began aggressively raising interest rates to combat inflation. Mortgage interest rates are not determined by the central bank. However, it is affected by the Fed’s interest rate increases.
With mortgage rates already reaching 8% this year, the highest level since 2000, the question arises of what the rest of the year holds for potential homebuyers. The housing market affordability crisis has caused mortgage applications to fall to their lowest level in decades.
Progress in inflation and other key economic indicators has the potential to alleviate some of the upward pressure on mortgage interest rates. But if future inflation data comes in warmer than expected and the Fed chooses to raise interest rates further, mortgage rates could continue to rise in 2023.
There will always be fluctuations in the mortgage and housing markets. That’s why experts say it’s a good idea for home buyers to focus on what they can control: getting the best rate for their finances.
To increase your odds of qualifying for the lowest rate available, take steps to improve your credit score and save for a down payment. Also be sure to look at the annual percentage rate, or APR, which reflects the mortgage interest rate plus other borrowing costs. You can make a more accurate apples-to-apples comparison by looking at the total cost of borrowing money from multiple lenders.
30 year fixed rate mortgage
The average 30-year fixed mortgage interest rate was 7.98%, up 6 basis points from a week ago. (One basis point is equivalent to 0.01%.) Thirty-year fixed mortgages are the most common loan term. A 30-year fixed-rate mortgage will generally have a higher interest rate than a 15-year fixed-rate mortgage, but will also have a lower monthly payment. You won’t be able to pay off your home as quickly, and you’ll pay more interest over time, but if you want to minimize your monthly payment, a 30-year fixed mortgage is a good option.
15 year fixed rate mortgage
The average rate on a 15-year fixed mortgage is 7.19%, representing a 13 basis point increase from the same period last week. Compared to a 30-year fixed mortgage, a 15-year fixed mortgage with the same loan value and interest rate will have a higher monthly payment. But if you can afford the monthly payments, a 15-year loan has many advantages. You’ll typically get a lower interest rate and pay less interest overall because you pay off your mortgage much faster.
5/1 adjustable rate mortgages
The average rate for the 5/1 ARM is 6.97%, an increase of 9 basis points compared to the same period last week. For the first five years, you’ll typically get a lower interest rate with a 5/1 adjustable rate mortgage compared to a 30-year fixed mortgage. However, as detailed in the loan terms, changes in the market may cause your interest rate to increase after this period. So if you plan to sell or refinance your home before the rate changes, an adjustable-rate mortgage may be a good option. However, if this is not the case, you could face a significantly higher interest rate if market rates change.
Mortgage rate trends
In March 2022, the Federal Reserve began increasing the federal funds rate to increase the cost of borrowing and slow the economy. The central bank, which increased interest rates 11 times, chose not to increase interest rates again at its meeting in September in order to monitor how inflation and the economy would react. Although the Fed decided to keep interest rates at the same level for a while, it kept the door open to further interest rate increases this year.
“Today’s high mortgage rates are not the only challenge we face in the current market,” said Erin Sykes, chief economist at Nest Seekers International. “The combination of high interest rates plus persistent property prices and persistent inflation is making daily life more expensive.”
Mortgage interest rates are unlikely to return to the lowest levels early in the pandemic, but mortgage interest rates are unlikely to fall before the end of the year, experts say.
But for that to happen, Sykes says we need to see inflation retreat consistently over at least four to six measurements. Keeping federal funds rates stable could also help stabilize mortgage rates in 2024.
Fannie Mae is calling for the average 30-year fixed mortgage rate to end the year at 7.3%.
We use data collected by Bankrate 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 fixed||7.98%||7.92%||+0.06|
|15 year fixed||7.19%||7.06%||+0.13|
|Huge 30 year mortgage rate||7.97%||7.95%||+0.02|
|30-year mortgage refinance rate||8.13%||8.08%||+0.05|
Prices as of October 24, 2023.
How to find personalized mortgage rates?
When you’re ready to apply for a loan, you can reach out to a local mortgage broker or search online. Be sure to consider your current financial situation and goals when looking for a mortgage.
Specific mortgage rates will vary depending on factors such as credit score, down payment, debt-to-income ratio and loan-to-value ratio. Having a good credit score, a higher down payment, a low DTI, a low LTV, or any combination of these factors can help you get a lower interest rate.
Interest rate isn’t the only factor that affects the cost of your home. Be sure to consider other costs like fees, closing costs, taxes, and deductibles. Be sure to talk to a variety of lenders, including local and national banks, credit unions and online lenders, and comparison shop to find the best loan for you.
What is the best loan term?
An important consideration when choosing a mortgage is the loan term or payment schedule. The most commonly offered loan terms are 15 years and 30 years, but you can also find 10, 20 and 40 year mortgages. Mortgages are further divided into fixed-rate and adjustable-rate mortgages. Interest rates on fixed-rate mortgages are the same throughout the life of the loan. Unlike a fixed-rate mortgage, interest rates on an adjustable-rate mortgage are fixed only for a certain period of time (usually five, seven or 10 years). After that, the rate fluctuates annually depending on the market rate.
One thing you need to consider when deciding between a fixed-rate and adjustable-rate mortgage is how long you plan to live in your home. Fixed-rate mortgages may be the best option for those who plan to stay in a new home for a long time. Fixed-rate mortgages offer more stability over time than adjustable-rate mortgages, but adjustable-rate mortgages may offer lower interest rates upfront. However, if you plan to keep your home for only a few years, you may be able to get a better deal with an adjustable-rate mortgage.