Interest rates for most major types of home loans reversed direction again, inching back up but continuing to avoid gaining any steam in either direction.
The average on the 30-year fixed mortgage, the home loan of choice for most homebuyers, rose to 3.28% from 3.25% the previous business day, marking the 13th time in the last seven weeks it’s changed direction. The average for the 15-year fixed rose to 2.45% from 2.43% the previous business day.
Mortgage rates are closely linked to 10-year Treasury yields, which are heavily influenced by inflation fears and have kept borrowing costs on a pretty tight leash in the past couple of months. While yields are much higher than they were at the start of the year, the debate over where inflation may go has had them bouncing around recently.
Rates on fixed mortgages have ticked up from the record lows reached this winter (2.65% for 30-year and 2.16% for 15-year, according to Freddie Mac’s measure) but they are still quite affordable by historic standards. (In the decade leading up to the onset of the pandemic, for instance, the 30-year often stayed between 3.5% and 4.5%.)
The low rates have bolstered buying power during the pandemic, allowing house hunters to buy more expensive homes with the same monthly budget and helping to fuel a fiercely competitive residential real estate boom. But home prices have gotten so high, and the choice of homes so small, that the relatively low rates are increasingly not enough for prospective homebuyers.
“There are many potential homebuyers who would like to take advantage of low mortgage rates, but competition is strong,” Sam Khater, Freddie Mac’s chief economist, said in a statement this week. “Home prices continue to accelerate while inventory remains low and new home construction cannot happen fast enough.”
Mortgage rates, like the rates on any loan, are going to depend on your credit score, with lower rates going to people with better scores, all else being equal. The rates shown reflect the average offered by more than 200 of the country’s top lenders, assuming the borrower has a FICO credit score of 700-759 (within the “good” or “very good” range) and a loan-to-value ratio of 80%.
30-Year Mortgage Rates Rise
A 30-year fixed mortgage is by far the most common type of mortgage because it offers a consistent and relatively low monthly payment. (Shorter-term fixed mortgages have higher payments because the borrowed money is paid back more quickly.)
Besides conventional 30-year mortgages, some are backed by the Federal Housing Authority or the Department of Veterans Affairs. FHA loans offer borrowers with lower credit scores or a smaller down payment a better deal than they might otherwise get; VA loans let current or past members of the military and their families skip a down payment.
- 30-year fixed: The average rate rose to 3.28% from 3.25% the previous business day. A week ago, it was 3.19%. For every $100,000 borrowed, monthly payments would cost approximately $436.85, about $4.93 more than a week ago.
- 30-year fixed (FHA): The average rate rose to 3.12% from 3.07% the previous business day. A week ago, it was 3.03%. For every $100,000 borrowed, monthly payments would cost approximately $428.10, about $4.88 more than a week ago.
- 30-year fixed (VA): The average rate rose to 3.18% from 3.13% the previous business day. A week ago, it was 3.08%. For every $100,000 borrowed, monthly payments will cost approximately $431.37, about $5.44 more than a week ago.
All else being equal, a higher rate increases your monthly pay3.13ment, but there are other parts of the equation. For example, if you know your monthly payment can’t be more than $2,000, you can get a $387,000 home at a 3.4% rate or a $380,000 home at a 3.6% rate. Both assume a 20% down payment, typical homeowners’ insurance costs, and property taxes, per our mortgage calculator.
15-Year Mortgage Rate Inches Up
The major advantage of a 15-year fixed mortgage is that it offers a lower interest rate than the 30-year and you’re paying off your loan more quickly, so your total borrowing costs are far lower. But for the same reason—that the loan is paid back over a shorter time frame—the monthly payments will be higher.
- 15-year fixed: The average rate rose to 2.45% from 2.43% the previous business day. A week ago, it was 2.40%. For every $100,000 borrowed, monthly payments would cost approximately $664.44, about $2.35 more than a week ago.
Besides fixed-rate mortgages, there are adjustable-rate mortgages (ARMs), where rates change based on a benchmark index tied to Treasury bonds or other interest rates. Most adjustable-rate mortgages are actually hybrids, where the rate is fixed for a period of time and then adjusted periodically. For example, a common type of ARM is a 5/1 loan, which has a fixed rate for five years (the “5” in “5/1”) and is then adjusted every one year (the “1”).
Jumbo Mortgage Rates Are Mixed
Jumbo loans, which allow you to borrow bigger amounts for more expensive properties, tend to have slightly higher interest rates than loans for more standard amounts. Jumbo means over the limit that Fannie Mae and Freddie Mac are willing to buy from lenders, typically $548,250 for a single-family home (except in Hawaii, Alaska, and a few federally designated high-cost markets, where the limit is $822,375).
- Jumbo 30-year fixed: The average rate fell to 3.50% from 3.54% the previous business day. A week ago, it was 3.52%. For every $100,000 borrowed, monthly payments would cost approximately $449.04, about $1 less than a week ago.
- Jumbo 15-year fixed: The average rate stayed at 3.13%, the same as the previous business day. A week ago, it was 3.13%. For every $100,000 borrowed, monthly payments would cost approximately $696.85.
Refinance Rates Mixed
Refinancing an existing mortgage tends to be slightly more expensive than getting a new one, especially in a low-rate environment.
- 30-year fixed: The average rate to refinance rose to 3.57% from 3.53% the previous business day. A week ago, it was 3.44%. For every $100,000 borrowed, monthly payments would cost approximately $452.96, about $7.26 more than a week ago.
- 15-year fixed: The average rate to refinance stayed at 2.63%, the same as the previous business day. A week ago, it was 2.60%. For every $100,000 borrowed, monthly payments at that rate will cost approximately $672.93, about $1.42 more than a week ago.
Our rates for “today” reflect national averages provided by more than 200 of the country's top lenders one business day ago, and the “previous” is the rate provided the business day before that. Similarly, the week earlier references compare the data from five business days earlier (so bank holidays are excluded.) The rates assume a loan-to-value ratio of 80% and a borrower with a FICO credit score of 700 to 759—within the “good” to “very good” range. They’re representative of the rates customers would see in actual quotes from lenders, based on their qualifications, and may vary from advertised teaser rates.