Current Mortgage Interest Rates on Oct. 3, 2023: Rates Increase The Fed's interest rate hikes have increased costs for prospective homebuyers
This week, some major mortgage rates inched up
A few significant mortgage rates climbed over the last seven days. The average interest rates for both 15-year fixed and 30-year fixed mortgage rates both increased. We also saw an increase 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 30-year fixed-mortgage rate average is 7.80%, which is a rise of 5 basis points from seven days ago. (A basis point is equivalent to 0.01%.) Thirty-year fixed mortgages are the most common loan term. A 30-year fixed rate mortgage will usually have a lower monthly payment than a 15-year one -- but typically a higher interest rate. 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 6.97%, which is an increase of 8 basis points from the same time last week. Compared to a 30-year fixed mortgage, a 15-year fixed mortgage with the same loan value and interest rate will have a bigger monthly payment. However, if you're able to afford the monthly payments, there are several benefits to a 15-year loan. These include typically 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 adjustable-rate mortgage has an average rate of 6.72%, a climb of 11 basis points from seven days ago. With an ARM mortgage, you'll typically get a lower interest rate than a 30-year fixed mortgage for the first five years. But changes in the market might cause your interest rate to increase after that time, as detailed in the terms of your loan. If you plan to sell or refinance your house before the rate changes, an adjustable-rate mortgage might 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 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 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 | 7.80% | 7.75% | +0.05 |
| 15-year fixed rate | 6.97% | 6.89% | +0.08 |
| 30-year jumbo mortgage rate | 7.83% | 7.78% | +0.05 |
| 30-year mortgage refinance rate | 8.01% | 7.91% | +0.10 |
Rates as of October 3, 2023.
How to find the best mortgage rates
You can get a personalized mortgage rate by connecting with your local mortgage broker or using an online calculator. Make sure to take into account your current finances and your goals when searching for a mortgage.
A range of factors -- including your down payment, credit score, loan-to-value ratio and debt-to-income ratio -- will all affect your mortgage interest rate. Generally, you want a higher credit score, a higher down payment, a lower DTI and a lower LTV to get a lower interest rate.
Apart from the mortgage interest rate, additional costs including closing costs, fees, discount points and taxes might also factor into the cost of your home. Make sure you talk to multiple lenders -- for example, local and national banks, credit unions and online lenders -- and comparison shop to find the best loan for you.
What's the best loan term?
One important consideration 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. The interest rates in a fixed-rate mortgage are fixed for the duration of the loan. For adjustable-rate mortgages, interest rates are the same for a certain number of years (commonly five, seven or 10 years), then the rate fluctuates annually based on the current interest rate in the market.
When choosing between a fixed-rate and adjustable-rate mortgage, you should take into consideration how long you plan to live in your house. For people who plan on staying long-term in a new house, fixed-rate mortgages may be the better option. While adjustable-rate mortgages may offer lower interest rates upfront, fixed-rate mortgages are more stable over time. If you don't have plans to keep your new home for more than three to 10 years, however, an adjustable-rate mortgage might give you a better deal. The best loan term is entirely dependent on your personal situation and goals, so make sure to consider what's important to you when choosing a mortgage.
This story originally appeared on: CNet - Author:Katherine Watt
