Current Mortgage Rates for April 6, 2023: Rates Decrease – CNET [CNET]

This week, a couple of major mortgage rates declined, though rates remain high compared to a year ago. If you’re shopping for a home loan, see how your payments might be affected by inflation.

A variety of key mortgage rates trailed off over the last seven days. The average interest rates for both 15-year fixed and 30-year fixed mortgages dipped sharply. For variable rates, however, the 5/1 adjustable-rate mortgage increased slightly.

The Federal Reserve announced a 25-basis point increase to its benchmark short-term interest rate on March 22. This could have an impact on mortgage rates, but it’s difficult to say just how much for a market already in flux.

“We’re in one of the most volatile markets in terms of rates since 2008,” says Jennifer Beeston, senior vice president at Guaranteed Rate, a national mortgage lender.

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.

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 two meetings of 2023. The decision to hike by 0.25% on March 22 suggests that inflation is cooling and the central bank may be able to ease up — but not stop — on its rate hikes.

While mortgage rates have dipped a bit from their December 2022 peak, they still aren’t dramatically lower. Fewer buyers are willing to jump into the housing market, driving demand down and causing home prices 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.

“Instead of getting into the minutiae of what the market’s doing every six seconds, buyers need to focus on what it is they’re really trying to accomplish and have a good game plan,” Beeston says.

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

For a 30-year, fixed-rate mortgage, the average rate you’ll pay is 6.73%, which is a decline of 15 basis points as of seven days 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 often 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 5.95%, which is a decrease of 17 basis points compared to a week ago. You’ll definitely have a bigger 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, if you’re able to afford the monthly payments. These include usually 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 5.74%, an uptick of 4 basis points from the same time last week. With an adjustable-rate mortgage mortgage, you’ll usually get a lower interest rate than a 30-year fixed mortgage for the first five years. But changes in the market could cause your interest rate to increase after that time, as detailed in the terms of your loan. For borrowers who plan to sell or refinance their house before the rate changes, an ARM may be a good option. Otherwise, changes in the market mean your interest rate could be a good deal higher once the rate adjusts.

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 rate changes over time. This table summarizes the average rates offered by lenders across the US:

Current average mortgage interest rates

Loan type	Interest rate	A week ago	Change
30-year fixed rate	6.73%	6.88%	-0.15
15-year fixed rate	5.95%	6.12%	-0.17
30-year jumbo mortgage rate	6.75%	6.94%	-0.19
30-year mortgage refinance rate	6.85%	6.99%	-0.14

Rates as of April 6, 2023.

How to find the best mortgage rates

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

The interest rate isn’t the only factor that affects the cost of your home. Be sure to also consider other factors such as fees, closing costs, taxes and discount points. You should talk to multiple lenders — including local and national banks, credit unions and online lenders — and comparison shop to find the best mortgage loan for you.

What’s the best loan term?

When picking a mortgage, you should consider the loan term, or payment schedule. The most common loan terms are 15 years and 30 years, although 10-, 20- and 40-year mortgages also exist. Mortgages are further divided into fixed-rate and adjustable-rate mortgages. The interest rates in a fixed-rate mortgage are fixed for the duration of the loan. For adjustable-rate mortgages, interest rates are set for a certain number of years (commonly five, seven or 10 years), then the rate adjusts annually based on the current interest rate in the market.

When deciding between a fixed-rate and adjustable-rate mortgage, you should think about how long you plan to live in your home. For people who plan on living long-term in a new house, fixed-rate mortgages may be the better option. Fixed-rate mortgages offer greater stability over time in comparison to adjustable-rate mortgages, but adjustable-rate mortgages can sometimes offer lower interest rates upfront. However, you might get a better deal with an adjustable-rate mortgage if you only plan to keep your home for a couple 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.