Mortgage Interest Rates Today for June 7, 2023: Rates Decrease – CNET

A variety of key mortgage rates sank lower over the last seven days. The average interest rates for both 15-year fixed and 30-year fixed mortgages had a downswing. For variable rates, however, the 5/1 adjustable-rate mortgage trended slightly upward.

On the heels of cooling inflation, the Federal Reserve announced on May 3 a 25-basis-point increase to its benchmark short-term interest rate. The Fed’s May meeting marks what could be the last increase we see for the time being. The central bank has signaled that it may soon be time to pause on rate hikes. Depending on incoming inflation data, the next step would be to hold rates where they are for an extended period of time in order to bring inflation down to its 2% target.

As long as inflation continues to trend downward, experts say a pause in rate hikes from the Fed could bring some stability to today’s volatile mortgage rate market.

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. Throughout March and April, rates fluctuated in the 6% range.

“Ultimately, more certainty about the Fed’s actions will help to smooth out some of the volatility we have seen with mortgage rates,” says Odeta Kushi, deputy chief economist at First American Financial Corporation.

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 three meetings of 2023. The decision to hike by 0.25% on May 3 suggests that inflation is cooling and the central bank may soon be able to pause its rate hiking regime. While the central bank is unlikely to cut rates any time soon, positive signaling from the Fed and cooling inflation may ease some of the upward pressure on mortgage rates.

“If inflation keeps coming down, that will be the biggest driver, outside of the Fed, that’s really going to help bring rates down to a better level and improve affordability for home buyers,” says Scott Haymore, head of capital markets and mortgage pricing at TD Bank.

However, mortgage rates remain well above where they were a year ago. Fewer buyers are willing to jump into the housing market, driving demand down and causing home prices in some regions 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.

“The most important thing is that they find the right home. The second most important thing is obviously to find the most efficient way to finance it,” says Melissa Cohn, regional vice president of William Raveis Mortgage.

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 interest rate for a standard 30-year fixed mortgage is 7.02%, which is a decline of 11 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 higher 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 6.38%, which is a decrease of 11 basis points compared to a week ago. 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 can 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 adjustable-rate mortgage has an average rate of 6.06%, an addition of 2 basis points from seven days ago. For the first five years, you’ll typically get a lower interest rate with a 5/1 ARM compared to a 30-year fixed mortgage. But since the rate changes with the market rate, you could end up paying more after that time, as described in the terms of your loan. If you plan to sell or refinance your house before the rate changes, an adjustable-rate mortgage may make sense for you. If not, shifts 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 information collected by Bankrate to track daily mortgage rate trends. This table summarizes the average rates offered by lenders nationwide:

Average mortgage interest rates

Product Rate Last week Change
30-year fixed 7.02% 7.13% -0.11
15-year fixed 6.38% 6.49% -0.11
30-year jumbo mortgage rate 7.03% 7.11% -0.08
30-year mortgage refinance rate 7.11% 7.19% -0.08

Rates as of June 7, 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. Make sure to think about your current financial situation and your goals when searching for a mortgage.

Things that affect the mortgage interest 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.

Besides the mortgage rate, other factors including closing costs, fees, discount points and taxes might also factor into the cost of your house. Be sure to talk to several different 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. The interest rates in a fixed-rate mortgage are stable for the duration of the loan. For adjustable-rate mortgages, interest rates are stable for a certain number of years (usually five, seven or 10 years), then the rate adjusts annually based on the market interest rate.

When choosing between a fixed-rate and adjustable-rate mortgage, you should take into consideration the length of time you plan to stay in your house. Fixed-rate mortgages might be a better fit for those who plan on living in a home for quite some time. Fixed-rate mortgages offer greater stability over time in comparison to adjustable-rate mortgages, but adjustable-rate mortgages might offer lower interest rates upfront. If you aren’t planning to keep your new house for more than three to 10 years, however, an adjustable-rate mortgage may give you a better deal. The best loan term depends on an individual’s situation and goals, so be sure to consider what’s important to you when choosing a mortgage.

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