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Mortgage rates are officially the highest they've been since the start of the millennium. Average 30-year mortgage rates reached a 23-year high of 7.31% this week, according to Freddie Mac.
Mortgage rates have been climbing this week in anticipation of a "higher for longer" stance from the Federal Reserve — referring to the central bank's indication that it will need to keep the federal funds rate elevated for longer than initially expected to get inflation down to an acceptable level.
"The 30-year fixed-rate mortgage has hit the highest level since the year 2000," Sam Khater, Freddie Mac's chief economist, said in a press release. "However, unlike the turn of the millennium, house prices today are rising alongside mortgage rates, primarily due to low inventory. These headwinds are causing both buyers and sellers to hold out for better circumstances."
Mortgage Rates Today
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30-Year Fixed Mortgage Rates
This week, the average 30-year fixed mortgage rate was 7.31%, according to Freddie Mac. This is a 12-basis-point increase from the week before, and the highest this rate has been since 2000.
The 30-year fixed-rate mortgage is the most common type of home loan. With this type of mortgage, you'll pay back what you borrowed over 30 years, and your interest rate won't change for the life of the loan.
The lengthy 30-year term allows you to spread out your payments over a long period of time, meaning you can keep your monthly payments lower and more manageable. The trade-off is that you'll have a higher rate than you would with shorter terms or adjustable rates.
15-Year Fixed Mortgage Rates
Average 15-year mortgage rates were 6.72% this week, according to Freddie Mac data. This is an 18-basis-point increase from the previous week, and the highest this rate has been since 2001.
If you want the predictability that comes with a fixed rate but are looking to spend less on interest over the life of your loan, a 15-year fixed-rate mortgage might be a good fit for you. Because these terms are shorter and have lower rates than 30-year fixed-rate mortgages, you could potentially save tens of thousands of dollars in interest. However, you'll have a higher monthly payment than you would with a longer term.
Are Mortgage Rates Going Up?
Mortgage rates started ticking up from historic lows in the second half of 2021 and increased significantly in 2022. But mortgage rates are expected to trend down this year.
In the last 12 months, the Consumer Price Index rose by 3.7%. As inflation comes down, mortgage rates should, too. But we'll likely need to see price growth slow further before we see substantial drops in rates.
For homeowners looking to leverage their home's value to cover a big purchase — such as a home renovation — a home equity line of credit (HELOC) may be a good option while we wait for mortgage rates to ease. Check out some of our best HELOC lenders to start your search for the right loan for you.
A HELOC is a line of credit that lets you borrow against the equity in your home. It works similarly to a credit card in that you borrow what you need rather than getting the full amount you're borrowing in a lump sum. It also lets you tap into the money you have in your home without replacing your entire mortgage, like you'd do with a cash-out refinance.
Current HELOC rates are relatively low compared to other loan options, including credit cards and personal loans.
How Do Fed Rate Hikes Affect Mortgages?
The Fed has been increasing the federal funds rate to try to slow economic growth and get inflation under control.
Mortgage rates aren't directly impacted by changes to the federal funds rate, but they often trend up or down ahead of Fed policy moves. This is because mortgage rates change based on investor demand for mortgage-backed securities, and this demand is often impacted by how investors expect Fed hikes to affect the broader economy.
As inflation comes down, mortgage rates should, too. But the Fed has indicated that it's watching for sustained signs of slowing inflation, and it's not going to lower rates again any time soon.