Today's Mortgage Rates on Jan. 3, 2024: Important Rate Climbs ...

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Mortgage rates over the last seven days followed a split path, but an important rate are now higher. Average 15-year fixed mortgage rates didn’t move, while average 30-year fixed mortgage rates grew. For variable rates, the 5/1 adjustable-rate mortgage slid lower.

30-year fixed mortgage: 7.05% 15-year fixed mortgage: 6.41% 5/1 adjustable-rate mortgage: 6.39%

Since early November, the average rate for a 30-year fixed mortgage started making sustained drops, largely due to the Federal Reserve’s less restrictive monetary policy, cooling inflation and other economic data. The most common home loans are now in the 6% to 7% range.

Yet even with the recent decline in rates, the mortgage market always slows down toward the end of the year. And rates aren’t compelling enough to upset holiday plans to do home shopping, according to Keith Gumbinger of HSH.com. “After the holidays, if rates are still in this range, we’ll likely see a little seasonal pent-up demand by borrowers expressed in January,” Gumbinger said.

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.

Today’s average mortgage interest rates

If you’re in the market for a home, check out how today’s mortgage rates compare to last week’s. We use data collected by Bankrate to track daily mortgage rate trends. This table summarizes the average rates offered by lenders across the country:

Current average mortgage interest rates Loan type Interest rate A week ago Change 30-year fixed rate 7.05% 7.00% +0.05 15-year fixed rate 6.41% 6.41% N/C 30-year jumbo mortgage rate 7.12% 7.06% +0.06 30-year mortgage refinance rate 7.21% 7.16% +0.05

Rates as of January 3, 2024.

How to choose a mortgage

When picking a mortgage, consider the loan term, or payment schedule. The most common mortgage terms are 15 and 30 years, although 10-, 20- and 40-year mortgages also exist. You’ll also need to choose between a fixed-rate mortgage, where the interest rate is set for the duration of the loan, and an adjustable-rate mortgage. With an adjustable-rate mortgage, the interest rate is only fixed for a certain amount of time (commonly five, seven or 10 years), after which the rate adjusts annually based on the market’s current interest rate. Fixed-rate mortgages offer more stability and are a better option if you plan to live in a home in the long term, but adjustable-rate mortgages may offer lower interest rates upfront.

30-year fixed-rate mortgages

The average 30-year fixed mortgage interest rate is 7.05%, which is an increase of 5 basis points from one week ago. (A basis point is equivalent to 0.01%.) A 30-year fixed mortgage is the most common loan term. It will often have a higher interest rate than a 15-year mortgage, but you’ll have a lower monthly payment.

15-year fixed-rate mortgages

The average rate for a 15-year, fixed mortgage is 6.41%, which is the same rate compared to a week ago. Though you’ll have a bigger monthly payment than a 30-year fixed mortgage, a 15-year loan usually comes with a lower interest rate, allowing you to pay less interest in the long run and pay off your mortgage sooner.

5/1 adjustable-rate mortgages

A 5/1 ARM has an average rate of 6.39%, a slide of 2 basis points compared to last week. You’ll typically get a lower introductory interest rate with a 5/1 ARM in the first five years of the mortgage. But you could pay more after that period, depending on how the rate adjusts annually. If you plan to sell or refinance your house within five years, an ARM could be a good option.

Calculate your monthly mortgage payment

Getting a mortgage should always depend on your financial situation and long-term goals. The most important thing is to make a budget and try to stay within your means. CNET’s mortgage calculator below can help homebuyers prepare for monthly mortgage payments.

Where mortgage rates are headed

At the start of the pandemic, mortgage rates were near record lows, around 3%. That all changed as inflation began to surge and the Fed kicked off a series of aggressive interest rate hikes, which indirectly drove up mortgage rates. Now, nearly two years after the first rate increase in March 2022, mortgage rates are still more than double what they were just a few years ago.

The central bank has kept interest rates steady since late July, and mortgage rates are just now starting to see sustained decreases. With the Fed extending its rate-hike pause in December, experts are waiting for the first rate cut. It may be months before that happens, but as long as inflation continues to moderate, mortgage rates should stabilize and start inching even lower in the coming months.

What affects mortgage rates? Federal Reserve monetary policy: The nation’s central bank doesn’t set interest rates, but when it adjusts the federal funds rate, mortgages tend to go in the same direction. Inflation: Mortgage rates tend to increase during high inflation. Lenders usually set higher interest rates on loans to compensate for the loss of purchasing power. The bond market: Mortgage lenders often use long-term bond yields, like the 10-Year Treasury, as a benchmark to set interest rates on home loans. When yields rise, mortgage rates typically increase. Geopolitical events: World events, such as elections, pandemics or economic crises, can also affect home loan rates, particularly when global financial markets face uncertainty. Other economic factors: The bond market, employment data, investor confidence and housing market trends, such as supply and demand, can also affect the direction of mortgage rates. Mortgage rate forecasts from experts

While mortgage forecasters base their projections on different data, most predict rates will remain near or above 7% for the rest of 2023. Here’s a look at where some of the major housing authorities expect average mortgage rates to land at the end of the year.

How to find the best mortgage rates

Though mortgage rates and home prices are high, the housing market won’t be unaffordable forever. It’s always a good time to save for a down payment and improve your credit score to help you secure a competitive mortgage rate when the time is right.

Save for a bigger down payment: Though a 20% down payment isn’t required, a larger upfront payment means taking out a smaller mortgage, which will help you save in interest. Boost your credit score: You can qualify for a conventional mortgage with a 620 credit score, but a higher score of at least 740 will get you better rates. Pay off debt: Experts recommend a debt-to-income ratio of 36% or less to help you qualify for the best rates. Not carrying other debt will put you in a better position to handle your monthly payments. Research loans and assistance: Government-sponsored loans have more flexible borrowing requirements than conventional loans. Some government-sponsored or private programs can also help with your down payment and closing costs. Shop around for lenders: Researching and comparing multiple loan offers from different lenders can help you secure the lowest mortgage rate for your situation.