Mortgage Rates on March 14, 2023: Rates Cool Off – CNET

A variety of notable mortgage rates dropped off over the last seven days. The average interest rates for both 15-year fixed and 30-year fixed mortgages dipped. The average rate of the most common type of variable-rate mortgage, the 5/1 adjustable-rate mortgage, also tapered off.

After nearly a year of rising mortgage rates, borrowers finally saw some relief late last year. Rates have declined since they hit their peak in late 2022, though current rates remain nearly double what they were during the record-low rate environment of the pandemic.

Inflation, and the series of rate hikes the Federal Reserve implemented in 2022 in an attempt to curb it, contributed in part to the rise in mortgage rates. Mortgage rates hit a 20-year high in late 2022, but now the macroeconomic environment is changing again.

Overall inflation remains high but has been slowly but consistently falling every month since it peaked in June 2022. The Fed’s decision to raise the federal funds rate by 0.25% on Feb. 1 after its latest meeting — the smallest increase since March 2022 — suggests that inflation may be cooling and the central bank may be able to ease up on its rate hikes.

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. 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 30-year fixed-mortgage rate average is 6.94%, which is a decline of 14 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 typically 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 6.19%, which is a decrease of 9 basis points from the same time 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 bigger monthly payment. However, if you can afford the monthly payments, there are several benefits to a 15-year loan. 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 ARM has an average rate of 5.85%, a slide of 1 basis point from seven days ago. 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, changes in the market may cause your interest rate to increase after that time, as detailed in the terms of your loan. Because of this, an ARM might be a good option if you plan to sell or refinance your house before the rate changes. But if that’s not the case, you may be on the hook for a much higher interest rate if the market rates shift.

Mortgage rate trends

Mortgage rates were historically low throughout most of 2020 and 2021 but increased steadily throughout 2022. The Federal Reserve raised the target federal funds rate — which influences the cost of most consumer loans, including mortgages — seven times in 2022 in an attempt to curb record-high inflation. Though the Fed doesn’t directly control mortgage rates, higher inflation and a higher federal funds rate tend to lead to higher mortgage rates.

The Fed’s latest 0.25% increase — smaller than its six previous increases of 0.75% or 0.5% — represents a shift in the Fed’s stance and suggests that the central bank might be less aggressive in its rate hikes in 2023 if inflation continues to come down. But inflation is still far from the Fed’s 2% target range and Fed officials have stated repeatedly (PDF) that additional rate hikes — albeit smaller ones — will be necessary. All said, while we may see mortgage rates pull back gradually this year, borrowers shouldn’t expect a sharp drop or a return to pandemic lows.

We use information 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:

Average mortgage interest rates

Product Rate Last week Change
30-year fixed 6.94% 7.08% -0.14
15-year fixed 6.19% 6.28% -0.09
30-year jumbo mortgage rate 6.93% 7.13% -0.20
30-year mortgage refinance rate 6.93% 7.06% -0.13

Rates as of March 14, 2023.

How to shop for the best mortgage rate

When you are ready to apply for a loan, you can connect with a local mortgage broker or search online. When researching home mortgage rates, take into account your goals and current financial situation.

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 higher credit score, a larger down payment, a lower DTI and a lower LTV to get a lower interest rate.

Besides the mortgage interest rate, additional costs including closing costs, fees, discount points and taxes might also impact the cost of your home. You should speak with a variety of lenders — such as local and national banks, credit unions and online lenders — and comparison shop to find the best loan for you.

What is a good loan term?

One important thing to consider when choosing a mortgage is the loan term, or payment schedule. The most common mortgage terms are 15 years and 30 years, although 10-, 20- and 40-year mortgages also exist. Another important distinction is between fixed-rate and adjustable-rate mortgages. For fixed-rate mortgages, interest rates are stable for the life of the loan. Unlike a fixed-rate mortgage, the interest rates for an adjustable-rate mortgage are only fixed for a certain amount of time (typically five, seven or 10 years). After that, the rate changes annually based on the current interest rate in the market.

One factor to think about when choosing between a fixed-rate and adjustable-rate mortgage is the length of time you plan on staying in your house. Fixed-rate mortgages might be a better fit for people who plan on staying in a home for quite some time. While adjustable-rate mortgages might have lower interest rates upfront, fixed-rate mortgages are more stable in the long term. However, you may get a better deal with an adjustable-rate mortgage if you only plan to keep your home for a few years. 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 think about your own priorities when choosing a mortgage.

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