Mortgage Rates on Oct. 9, 2023: Rates Move Higher If you're shopping for a home loan, see how your payments might be affected by interest rate hikes
This week, some important mortgage rates moved up
A variety of important mortgage rates went higher over the last seven days. The average interest rates for both 15-year fixed and 30-year fixed mortgage rates both crept higher. We also saw an inflation in the average rate of 5/1 adjustable-rate mortgages.
In March 2022, the Federal Reserve stepped in to combat surging inflation by hiking its key interest rate. Mortgage rates, which are not set by the central bank but are indirectly influenced by rate hikes, increased alongside.
After hiking interest rates 11 times since March 2022, the Federal Reserve opted to skip another increase during its September meeting. However, the Fed hasn't ruled out the possibility of additional increases if inflation doesn't continue to moderate.
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.
While inflation has dropped from its record highs, it's still above target. That means the Fed could continue to raise rates as it sees fit to increase the cost of borrowing and slow down the economy.
Progress on inflation and other key economic indicators may ease some of the upward pressure on mortgage rates. But if future inflation data comes in hotter than expected and the Fed chooses to hike rates further, mortgage rates could keep going up in 2023.
Fluctuations in the mortgage and housing markets are always going to happen. That's why experts say it's a good idea for homebuyers to focus on what they can control: getting the best rate for their financial situation.
To increase your odds of qualifying for the lowest rate available, take steps to improve your credit score and save for a down payment. Also, be sure to look at the annual percentage rate, or APR, which reflects the mortgage interest rate plus other borrowing charges. By looking at the total cost of borrowing from multiple lenders, you can make a more accurate apples-to-apples comparison.
30-year fixed-rate mortgages
The average interest rate for a standard 30-year fixed mortgage is 7.93%, which is a growth of 19 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 often have a greater 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 7.08%, which is an increase of 18 basis points compared to a week ago. You'll definitely have a larger 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. However, as long as you can afford the monthly payments, there are several benefits to a 15-year loan. 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 adjustable-rate mortgage has an average rate of 6.78%, a rise of 13 basis points from the same time last week. For the first five years, you'll typically get a lower interest rate with a 5/1 adjustable-rate mortgage compared to a 30-year fixed mortgage. However, 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. For borrowers who plan to sell or refinance their house before the rate changes, an adjustable-rate mortgage may be a good option. If not, shifts in the market might significantly increase your interest rate.
Mortgage rate trends
Mortgage rates were historically low throughout most of 2020 and 2021 but increased steadily throughout 2022 as the Federal Reserve began aggressively hiking interest rates. The top question is what the rest of 2023 has in store for prospective homebuyers.
"Today's high mortgage rates are not the only challenge we have in the current market," said Erin Sykes, chief economist at Nest Seekers International. "The combination of high interest rates plus sustained property prices and persistent inflation are making day-to-day life more expensive."
While experts say mortgage rates are unlikely to return to the rock-bottom levels in the early pandemic, there's a good chance we could see mortgage rates dip before the end of the year.
In order for that to happen, though, Sykes says we need to see inflation pull back on a consistent basis for at least four to six readings. If the federal funds rate remains steady, that should also help stabilize mortgage rates going into 2024.
Fannie Mae calls for the average 30-year fixed mortgage rate to close out the year at 7.1%.
We use rates collected by Bankrate to track changes in these daily rates. This table summarizes the average rates offered by lenders across the country:
Today's mortgage interest rates
| Loan term | Today's Rate | Last week | Change |
|---|---|---|---|
| 30-year mortgage rate | 7.93% | 7.74% | +0.19 |
| 15-year fixed rate | 7.08% | 6.90% | +0.18 |
| 30-year jumbo mortgage rate | 7.96% | 7.76% | +0.20 |
| 30-year mortgage refinance rate | 8.12% | 7.95% | +0.17 |
Rates as of October 9, 2023.
How to shop for the best mortgage rate
You can get a personalized mortgage rate by connecting with your local mortgage broker or using an online calculator. In order to find the best home mortgage, you'll need to take into account your goals and overall financial situation.
Specific mortgage 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.
Apart from the mortgage interest rate, additional costs including closing costs, fees, discount points and taxes might also impact the cost of your home. Be sure to comparison shop with multiple lenders -- such as credit unions and online lenders in addition to local and national banks -- in order to get a mortgage loan that's right for you.
What is a good loan term?
One important factor to consider when choosing a mortgage is the loan term, or payment schedule. The loan 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. For fixed-rate mortgages, interest rates are the same for the life of the loan. Unlike a fixed-rate mortgage, the interest rates for an adjustable-rate mortgage are only stable for a certain amount of time (most frequently five, seven or 10 years). After that, the rate fluctuates annually based on the current interest rate in the market.
One factor to think about when deciding between a fixed-rate and adjustable-rate mortgage is how long you plan on living in your house. For people who plan on staying long-term in a new house, fixed-rate mortgages may be the better option. Fixed-rate mortgages offer greater 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 might give you a better deal. The best loan term depends on your situation and goals, so make sure to think about what's important to you when choosing a mortgage.
This story originally appeared on: CNet - Author:Katherine Watt
