Today’s mortgage rates rise, but 15-year terms remain lowest option | May 25, 2023

Based on data compiled by Credible, mortgage rates for home purchases have risen for three key terms and fallen for another since yesterday.

Rates last updated on May 25, 2023. These rates are based on the assumptions shown here. Actual rates may vary. Credible, a personal finance marketplace, has 5,000 Trustpilot reviews with an average star rating of 4.7 (out of a possible 5.0).

What this means: Mortgage rates have fallen by over a quarter of a percentage point for 20-year terms, bringing the rate down to 6.25%. Meanwhile, rates 15- and 30-year terms have edged up to 6.125% and 6.99%, respectively. Additionally, rates for 10-year terms have jumped up by a quarter of a percentage point to 6.375%. Homebuyers looking for a smaller monthly payment should consider 20-year terms, as their rates are nearly three-quarters of a percentage point lower than those of 30-year terms. Borrowers who would rather maximize their interest savings should instead consider today’s lowest rates, 15-year terms at 6.125%.

To find great mortgage rates, start by using Credible’s secured website, which can show you current mortgage rates from multiple lenders without affecting your credit score. You can also use Credible’s mortgage calculator to estimate your monthly mortgage payments

Based on data compiled by Credible, mortgage refinance rates have risen across all key terms since yesterday.

Rates last updated on May 25, 2023. These rates are based on the assumptions shown here. Actual rates may vary. With 5,000 reviews, Credible maintains an “excellent” Trustpilot score.

What this means: Mortgage refinance rates have risen across all key terms. Rates for 15-year terms have edged up to 5.875%. Rates for 10-year terms have jumped up by over a quarter of a percentage point to 6.375%. Meanwhile, both 20- and 30-year terms have hit 6.99% after surging by nearly three-quarters of a percentage point and half of a percentage point, respectively. Homeowners looking to save the most on interest should consider 15-year terms at 5.875%, as they are today’s lowest rate. Borrowers who would rather have a smaller monthly payment should instead consider a 20- or 30-year term.

How mortgage rates have changed over time

Today’s mortgage interest rates are well below the highest annual average rate recorded by Freddie Mac — 16.63% in 1981. A year before the COVID-19 pandemic upended economies across the world, the average interest rate for a 30-year fixed-rate mortgage for 2019 was 3.94%. The average rate for 2021 was 2.96%, the lowest annual average in 30 years.

The historic drop in interest rates means homeowners who have mortgages from 2019 and older could potentially realize significant interest savings by refinancing with one of today’s lower interest rates. When considering a mortgage or refinance, it’s important to take into account closing costs such as appraisal, application, origination and attorney’s fees. These factors, in addition to the interest rate and loan amount, all contribute to the cost of a mortgage. 

How Credible mortgage rates are calculated

Changing economic conditions, central bank policy decisions, investor sentiment and other factors influence the movement of mortgage rates. Credible average mortgage rates and mortgage refinance rates reported in this article are calculated based on information provided by partner lenders who pay compensation to Credible.

The rates assume a borrower has a 700 credit score and is borrowing a conventional loan for a single-family home that will be their primary residence. The rates also assume no (or very low) discount points and a down payment of 20%.

Credible mortgage rates reported here will only give you an idea of current average rates. The rate you actually receive can vary based on a number of factors.

How does the Federal Reserve affect mortgage rates?

The Federal Reserve System — or “The Fed,” as it’s commonly called — is the United States’ central bank. It’s tasked with taking steps to keep the economy safe, stable and flexible. Consequently, the Fed controls the U.S. money supply and short-term interest rates, and sets the Fed funds rate, which is the rate that banks apply when borrowing from each other overnight. 

But the Fed doesn’t actually set mortgage rates. Rather, multiple things the Fed does influence mortgage rates. For example, while mortgage rates don’t mirror the Fed funds rate, they do tend to follow it. If that rate rises, mortgage rates typically rise in tandem.

The Fed also buys and sells mortgage-backed securities, or MBS — a package of similar loans that a major mortgage investor buys and then resells to investors in the bond market. When the Fed buys a lot of mortgage-backed securities, it creates demand in the market, and lenders can make money even if they offer lower mortgage rates. So rates tend to be lower when the Fed is doing a lot of buying.

When the Fed buys fewer MBS, demand falls and rates will likely rise. Similarly, when the Fed raises the Fed fund rate, mortgage rates will also increase.

If you’re trying to find the right mortgage rate, consider using Credible. You can use Credible’s free online tool to easily compare multiple lenders and see prequalified rates in just a few minutes.

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