Mortgage Rates on the Rise: What Homebuyers Need to Know

Mortgage rates have been gradually increasing for the past year, and this trend is expected to continue in 2023. This means that homebuyers need to be aware of the current market conditions and take steps to get the best rate they can. In this article, we’ll look at the recent changes in mortgage rates and what this means for homebuyers this year.

Recent Mortgage Rate Changes

A few notable mortgage rates went higher over the last seven days. The average interest rates for both 15-year fixed and 30-year fixed mortgages both increased significantly. We also saw a rise in the average rate of 5/1 adjustable-rate mortgages, though not as fast.

After nearly a year of rising mortgage rates, borrowers are finally starting to see some relief. Rates have been gradually declining since they hit their peak in late 2022, though current rates remain nearly double what they were during the record-low rate environment of the pandemic.

Inflation, and the series of rate hikes the Federal Reserve implemented in 2022 to curb it, partly contributed to the rise in mortgage rates. Mortgage rates hit a 20-year high in late 2022, but now the macroeconomic environment is changing again. Overall inflation remains high but has been slowly but consistently falling every month since it peaked in June 2022. The Fed’s decision to raise the federal funds rate by 0.25% on Feb. 1 after its latest meeting — the smallest increase since March 2022 — suggests that inflation may be cooling and the central bank may be able to ease up on its rate hikes.

What Does This Mean for Homebuyers?

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. 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, 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 6.83%, which is a growth of 17 basis points compared to one week ago. (A basis point is equivalent to 0.01%.) Thirty-year fixed mortgages are the most frequently used loan term. A 30-year fixed rate mortgage will usually have a smaller 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 payments.

Related Facts

• Mortgage rates hit a 20-year high in late 2022.
• The average rate for a 30-year fixed mortgage is 6.83%.
• The average rate for a 15-year fixed mortgage is 5.57%.
• The average rate for a 5/1 adjustable-rate mortgage is 4.32%.

Key Takeaways

• Mortgage rates have been steadily increasing for the past year.
• Rates are expected to decrease slightly in 2023 but remain higher than pre-pandemic levels.
• Homebuyers should focus on improving their credit score and saving for a down payment to get the best rate they can.
• Comparing rates and fees from multiple lenders is also recommended.

Conclusion

Mortgage rates have been on the rise for the past year, and this trend is expected to continue in 2023. Homebuyers should take steps to get the best rate they can, such as improving their credit score, saving for a down payment, and comparing rates and fees from multiple lenders. With the right preparation, homebuyers can still get a great deal on a mortgage, even in a rising rate environment.