A variety of important mortgage rates inched upward over the last seven days. The average interest rates for both 15-year fixed and 30-year fixed mortgages both made gains. For variable rates, the 5/1 adjustable-rate mortgage also rose.
After hiking interest rates 10 times since March 2022, the Federal Reserve pumped the brakes during its June meeting. The central bank’s benchmark federal funds rate will remain at a range of 5.00% to 5.25% for the time being, although the Fed hasn’t ruled out the possibility of further increases if inflation doesn’t continue to moderate.
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.
Current Mortgage Rates for July 2023
Mortgage rates change every day. Experts recommend shopping around to make sure you’re getting the lowest rate. By entering your information below, you can get a custom quote from one of CNET’s partner lenders.
About these rates: Like CNET, Bankrate is owned by Red Ventures. This tool features partner rates from lenders that you can use when comparing multiple mortgage rates.
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. Aside from a brief surge towards the end of May, rates continue to fluctuate in the 6% to 7% range.
Even though the Fed hit pause on rate hikes, mortgage interest rates will continue to fluctuate on a daily basis. That’s because mortgage rates aren’t tied to the federal funds rate in the same way other products are, such as home equity loans and home equity lines of credit, or HELOCs. Mortgage rates respond to a variety of economic factors, including inflation, employment and the broader outlook for the economy.
“Mortgage rates will continue to ebb and flow week to week, but ultimately, I think rates will stick to that 6% to 7% range we’re seeing now,” said Jacob Channel, senior economist at loan marketplace LendingTree. “I don’t anticipate them to spike or even show a sustained spike following this meeting,” Channel said.
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 increases in its first three meetings of 2023. The decision to hold rates steady on June 14 suggests that inflation is cooling and ongoing rate hikes may no longer be necessary to bring inflation down to the Fed’s 2% target. The central bank is unlikely to cut rates any time soon, but positive signaling from the Fed and cooling inflation may ease some of the upward pressure on mortgage rates.
“Rates are getting to a point of being steady. So, it’s more a question of how long it will take for rates to start ticking back down and when inflation will return to a place where your dollar starts buying a little bit more each month,” said Kevin Williams, founder of Full Life Financial Planning.
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.
“Interest rates have been much higher in the past and people bought homes and financed homes at those rates. But it’s been hard for people to react to such a rapid increase in just a short amount of time,” said Daniel Oney, research director at the Texas Real Estate Research Center at Texas A&M University. “Everybody had a target for how much they needed to save in order to go into the housing market, but when interest rates increased, those goal posts moved too,” he added.
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,” said Greg McBride, CFA and chief financial analyst at Bankrate. McBride expects rates to fall more consistently as the year progresses. “Thirty-year fixed mortgage rates will end the year near 5.25%,” he said.
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,” said 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 30-year fixed mortgage interest rate is 7.31%, which is an increase of 14 basis points compared to one week 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 often 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 6.59%, which is an increase of 9 basis points from seven days 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 usually 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 6.17%, an uptick of 10 basis points compared to a week ago. For the first five years, you’ll usually get a lower interest rate with a 5/1 adjustable-rate mortgage compared to a 30-year fixed mortgage. But changes in the market could cause your interest rate to increase after that time, as detailed in the terms of your loan. Because of this, an ARM could be a good option if you plan to sell or refinance your house before the rate changes. If not, shifts in the market could 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 across the US:
Average mortgage interest rates
| Product | Rate | Last week | Change |
|---|---|---|---|
| 30-year fixed | 7.31% | 7.17% | +0.14 |
| 15-year fixed | 6.59% | 6.50% | +0.09 |
| 30-year jumbo mortgage rate | 7.34% | 7.20% | +0.14 |
| 30-year mortgage refinance rate | 7.41% | 7.27% | +0.14 |
Rates as of July 7, 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. In order to find the best home mortgage, you’ll need to take into account your goals and overall financial situation.
Specific mortgage interest rates will vary based on factors including 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 those factors can help you get a lower interest rate.
Beyond the mortgage interest rate, other factors including closing costs, fees, discount points and taxes might also factor into the cost of your house. Make sure to shop around with multiple lenders — such as credit unions and online lenders in addition to local and national banks — in order to get a mortgage that’s the right fit for you.
What is a good loan term?
One important thing you should consider when choosing a mortgage is 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 the same for the duration of the loan. For adjustable-rate mortgages, interest rates are set for a certain number of years (typically five, seven or 10 years), then the rate changes annually based on the market interest rate.
When choosing between a fixed-rate and adjustable-rate mortgage, you should consider how long you plan to live in your house. For those who plan on living long-term in a new house, fixed-rate mortgages may be the better option. Fixed-rate mortgages offer more stability over time compared to adjustable-rate mortgages, but adjustable-rate mortgages can sometimes offer lower interest rates upfront. If you don’t have plans 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 rule of thumb; it all depends on your goals and your current financial situation. Be sure to do your research and think about your own priorities when choosing a mortgage.
Source: cnet.com