What Are Current Mortgage Rates?
The average fixed rate on a 30-year mortgage declined for the third consecutive week, retreating below 7% for the first time since February. Mortgage rates are highly volatile ahead of the busy spring homebuying season.
Mortgage interest rates are twice as high as they were at the beginning of 2022, which continues to have a tangible effect on mortgage affordability and consumer housing sentiment. Mortgage rates are still widely expected to fall through 2023 but have stayed stubbornly high in the first quarter of the year. Here are the current mortgage rates, without discount points unless otherwise noted, as of March 30:
-
- 30-year fixed: 6.92% (down from 7% a week ago).
-
- 20-year fixed: 6.71% (down from 6.78% a week ago).
-
- 15-year fixed: 6.12% (down from 6.2% a week ago).
-
- 10-year fixed: 6.29% (up from 6.25% a week ago).
-
- 5/1 ARM: 5.66% (down from 5.71% a week ago).
-
- 7/1 ARM: 5.77% (down from 5.86% a week ago).
-
- 10/1 ARM: 6.11% (down from 6.14% a week ago).
-
- 30-year jumbo loans: 6.99% (down from 7.06% a week ago).
-
- 30-year FHA loans: 5.84% with 0.06 point (down from 6% a week ago).
-
- VA purchase loans: 6.02% with 0.05 point (down from 6.21% a week ago).
Mortgage rates have trended up and down over the last few decades, as high as 18% in the early 1980s to record-setting lows under 3% during the coronavirus pandemic. But since rates rose abruptly in 2022, what’s considered a good mortgage rate today is different than it was just a year ago.
Historically speaking, a good interest rate on a mortgage is one that’s equal to or lower than the current national average. The best mortgage rates are typically reserved for well-qualified borrowers with a good credit score in the mid-700s or higher and a low debt-to-income ratio. Having a higher down payment can also help applicants lock in a lower rate.
As you shop around, you’ll quickly realize that mortgage rates fluctuate between lenders and mortgage companies. “It’s not unlike the way the price of consumer products fluctuate between retailers,” Sopko says.
There are many factors that can impact why one lender charges a certain rate over another. The two main ones are:
- Perceived risk: One lender may calculate a borrower’s risk a bit differently than another. Since underwriting criteria can vary, each lender may weigh certain factors more or less heavily. While one might be strict about the required credit score needed for the lowest rate, another might give more leeway if the borrower has more assets. Lenders may also treat those with nontraditional income streams differently.
- Margins: Mortgage lenders want to make a profit just like any other business, while also trying to stay competitive. “Rates will vary between lenders because each lender has its own internal cost structure and its own desire for margin above what the secondary market is paying,” explains Bill Packer, executive vice president and chief operating officer of American Financial Resources.
While rates are an important point of comparison when you’re reviewing loan options, be sure to look at other costs like origination fees and mortgage insurance, so you’ll get the full picture of what it’s actually costing you to get that rate. For example, one rate quote might seem lower than another, but that lender may be factoring in paying discount points, which will drive up your closing costs.
The best way to do an apples-to-apples comparison is to obtain a loan estimate from each lender, Packer says. Then you can go through them line by line to see how each offer stacks up.
Mortgage calculators can be useful tools to help you understand how interest rates can impact the cost of your home loan. By plugging in various numbers, you can see that even slight differences in mortgage rates can have a big effect, both in terms of monthly payment and long-term cost.
- On a $250,000 mortgage with a 20% down payment, a 5.5% interest rate would require a $1,136 monthly payment and cost $409,128 over the life of the loan.
- With a 4.5% rate, the payment goes down to $1,013 per month, and the total cost is $364,961.
Of course, there are other factors that you should include in your calculations to figure out what your true monthly mortgage cost will be, such as property taxes, home insurance and private mortgage insurance (if applicable).
Playing with various calculators can also help you figure out how much home you can actually afford before you do interest rate research and home shopping.
Mortgage interest rate and APR are not the same. Basically APR is the “all-in” cost of a loan, Sopko says. That includes origination fees and mortgage insurance, whereas the interest rate is simply the yearly interest you’ll pay on the money borrowed.
That’s why it makes sense to compare the APRs of two loans in addition to looking at the interest rates because you’ll get a more comprehensive picture of your total cost. Keep in mind that there are still other items to consider that will not be reflected in the APR, such as certain closing costs.
Finding and securing the lowest interest rate for your circumstances is one of the main considerations when choosing your home loan. To qualify for the best rate, you want to put yourself in the best possible position from a borrower risk standpoint. You should also research lenders to find the best overall deal. Here are the three main ways to get the lowest interest rate:
Credit improvement: Even a minimal increase in credit score has the potential to move you into a higher tier or creditworthiness, which may be reflected in the interest rates you’re offered. You can make improvements by paying down existing debt, making corrections to any credit report errors that might be having a negative impact and reconciling any past delinquencies.
Save up for a bigger down payment: If you have time on your side, accumulating a good sum of cash to put down on a home can potentially help you qualify for a better rate. It can also make you a more competitive buyer if another bidder on the same home is putting down less.
Shop around: While improving your credit or putting more money down is a great path to a better rate, that’s often not possible for some borrowers, especially if they’ve found their dream home and need to act quickly, Sopko says. “The best thing you can do is to give yourself options.”
Get your documentation in order: Once you’ve found a home and are quoted a strong interest rate, you’ll have to complete your home loan application in a timely manner to lock in the rate. You’ll want to have your financial documents ready to go. Lenders usually like to see two years of job history and income, Koors says. Other documents needed typically include tax returns, pay stubs, bank statements and permission for the lender to access your credit reports.
How are mortgage rates determined?
Mortgage rates are determined by factors that are out of your control and those that are related to your borrower profile and the type of loan. These include:
- Federal Reserve and economic activity: The Federal Reserve doesn’t actually set or control mortgage rates, says Jeremy Sopko, CEO of Nations Lending, but its actions can have an effect on where rates go. “The Fed raises and lowers short-term interest rates based on broad economic factors, but Fed rates and mortgage rates move independently of one another,” he explains. However, when demand for mortgage-backed securities (bundles of mortgages that are sold to investors) goes up, mortgage rates tend to go down, he says. In fact, to keep mortgage interest rates low throughout the coronavirus pandemic, the Federal Reserve purchased additional mortgage-backed securities.
- Your credit risk: The riskier you are in the eyes of a lender, the higher you can expect your rate to be, Sopko says. For example, having a high debt-to-income ratio, a poor credit score and an unstable work history means you are a higher-risk borrower. Therefore, you would likely have to pay a premium to borrow money and may even have to work with an alternative lender.
- Your down payment: How much or how little money you put toward a down payment can also impact your interest rate. “If you have less skin in the game, you’re a riskier borrower,” Sopko says. In most cases, with all other things being equal, the person putting down 3% will not get as favorable of a rate as someone putting down 20%.
- Mortgage type: You may see some minor differences between rates if you compare the different types of home loans including conventional loans, Federal Housing Administration loans, U.S. Department of Veterans Affairs loans and jumbo loans. “Jumbo loans are generally going to be a little bit higher, while the other loans are going to be in line with conventional loan rates because they are government-backed loans,” says Jerry Koors, president of Merchants Mortgage. There are also adjustable-rate mortgages that may start out at a lower fixed interest rate for a set period of time, but will change periodically.
- Length of loan: A 30-year mortgage will have a higher rate than a 15-year one because the borrowed money is going to be out there longer, posing a higher risk to the lender, Koors says.
Will mortgage rates go down?
To put it simply, mortgage rates will likely stay elevated until inflation is under control. According to the Consumer Price Index, inflation rose 6.5% annually in December – triple the Federal Reserve’s 2% target rate. The central bank implemented several aggressive benchmark rate hikes last year, although it’s started to slow the pace of rate increases in 2023 due to cooling consumer prices.
As a result of the Fed’s loosening economic policy, mortgage rates already began to fall meaningfully at the beginning of the year, and more declines are expected. Economists interviewed for the U.S. News 2023 mortgage rate forecast believe that rates will dip below 6% in the spring and summer months before retreating further by year-end.
Industry research also suggests that rates will gradually fall during the course of 2023. The Mortgage Bankers Association predicts in its latest Mortgage Finance Forecast that 30-year fixed rates will remain above 6% for the first few months of the year before reaching 5.2% by the fourth quarter. Mortgage giants Freddie Mac and Fannie Mae have less bullish outlooks, with the 30-year fixed rate expected to end the year at 6.2% and 6.1%, respectively.
When should you lock in a mortgage rate?
Once you’ve found a home and are quoted a strong interest rate, you’ll have to complete your home loan application in a timely manner to lock in the rate. You’ll want to have your financial documents ready to go. Lenders usually like to see two years of job history and income, Koors says. Other documents needed typically include tax returns, pay stubs, bank statements and permission for the lender to access your credit reports.
