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Here are the mortgage rates for May 26, 2023: rates are rising

A few major mortgage rates have risen quite rapidly over the past seven days. Average 15-year and 30-year fixed mortgage interest rates increased, and average 5/1 variable rate mortgage rates also increased.

In the wake of the slowdown in inflation, the Federal Reserve announced on May 3 a 25 basis point increase in its benchmark short-term interest rate. The May Fed meeting marks what may be the last bull run we see yet. The central bank has signaled that it may soon be time to pause rate hikes. According to the incoming inflation data, the next step would be to keep rates at their level for an extended period in order to bring inflation back to its target of 2%.

As long as inflation continues to decline, experts say a pause in Fed rate hikes could bring some stability to today’s volatile mortgage rate market.

Mortgage lending hit a 20-year high at the end of 2022, but now the macroeconomic environment is changing again. Rates fell sharply in January before rising again in February. In March and April, rates fluctuated around 6%.

“Ultimately, greater certainty about Fed actions will help alleviate some of the volatility we’ve seen with mortgage rates,” said Odeta Kushi, deputy chief economist at First American Financial Corporation.

Although the rates do not directly follow changes in the federal funds rate, they do react to inflation. Overall, inflation remains high but has been slowly but steadily declining every month since peaking in June 2022.

After significantly raising rates in 2022, the Fed opted for smaller rate increases of 25 basis points in its first three meetings of 2023. The decision to hike 0.25% on May 3 suggests that inflation is slowing and the central bank may soon be able to suspend its rate hike regime. Although the central bank is unlikely to cut rates anytime soon, positive signals from the Fed and slowing inflation could ease some of the upward pressure on mortgage rates.

“If inflation continues to fall that will be the main driver, aside from the Fed, that will really help bring rates down to a better level and improve affordability for homebuyers,” Scott Haymore said. , responsible for capital markets and mortgage pricing. at TD Bank.

However, mortgage rates remain well above what they were a year ago. Fewer buyers are ready to jump into the housing market, lowering demand and driving home prices down in some areas, but that’s only part of the affordability equation houses.

“Even though home prices in many parts of the country have fallen since the start of the year, high rates make it prohibitively expensive for many to buy,” said Jacob Channel, senior loan market economist. LendingTree. It’s still difficult for many buyers, especially those looking for their first home, to afford a monthly payment.

What does this mean for buyers this year? Mortgage rates are expected to decline slightly in 2023, although they are very unlikely to return to the lows of 2020 and 2021. However, rate volatility could continue for some time. “Expect mortgage rates to rise and fall in the first half of the year, at least until there is a consensus on when the Fed will conclude the interest rate hike. “, 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 steadily 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 possible for their situation.

“The most important thing is that they find the right home. The second most important thing is obviously finding the most efficient way to finance it,” says Melissa Cohn, regional vice president of William Raveis Mortgage.

Take steps to improve your credit score and save for a down payment to increase your chances of qualifying for the lowest rate available. Also, be sure to compare 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 7.15%, up 16 basis points from a week ago. (One basis point equals 0.01%.) Thirty-year fixed mortgages are the most commonly used loan term. A 30-year fixed rate mortgage will generally have a higher interest rate than a 15-year fixed rate mortgage, but also a lower monthly payment. You won’t be able to pay off your home as quickly and you’ll pay more interest over time, but a 30-year fixed rate mortgage is a good option if you’re looking to minimize your monthly payment.

15-year fixed rate mortgages

The average rate for a 15-year fixed mortgage is 6.58%, an increase of 20 basis points from seven days ago. Compared to a 30-year fixed mortgage, a 15-year fixed mortgage with the same loan value and interest rate will result in a higher monthly payment. But a 15-year loan will usually be the best deal, as long as you can afford the monthly payments. These typically include the ability to get a lower interest rate, pay off your mortgage sooner, and pay less total interest over the long term.

5/1 Adjustable Rate Mortgages

A 5/1 ARM has an average rate of 6.01%, up 16 basis points from last week. With a variable rate mortgage, you’ll generally get a lower interest rate than a 30-year fixed mortgage for the first five years. However, you may end up paying more after this period, depending on the terms of your loan and how the rate adjusts to the market rate. For this reason, an adjustable rate mortgage could be a good option if you plan to sell or refinance your home before the rate changes. Otherwise, changes in the market could significantly increase your interest rate.

Mortgage Rate Trends

Mortgage rates have been historically low for most of 2020 and 2021, but have risen steadily throughout 2022. Mortgage rates today are roughly double what they were a year ago , pushed up by persistently high inflation. This high inflation prompted the Fed to raise its target federal funds rate seven times in 2022. By raising rates, the Fed makes it more expensive to borrow money and more attractive to keep money in savings, removing demand for goods and services.

Mortgage interest rates don’t follow Fed actions in the same way as, say, home equity line of credit rates. But they react to inflation. Therefore, slowing inflation data and positive signals from the Fed will influence the evolution of mortgage rates more than the most recent 25 basis point rate hike.

We use data collected by Bankrate to track daily trends in mortgage rates. This table summarizes the average rates offered by lenders nationwide:

Average Mortgage Interest Rates

ProductRateLast weekChange
30 years fixed7.15%6.99%+0.16
15 years fixed6.58%6.38%+0.20
30-year jumbo mortgage rate7.17%7.04%+0.13
30-year mortgage refinance rate7.21%7.09%+0.12

Rates as of May 26, 2023.

How to Find Custom Mortgage Rates

When you’re ready to apply for a loan, you can connect with a local mortgage broker or search online. In order to find the best home loan, you will need to consider your goals and your overall financial situation.

A range of factors – including your down payment, credit score, loan-to-value ratio and debt-to-income ratio – will all affect your mortgage interest rate. Having a good credit rating, a larger down payment, low DTI, low LTV, or any combination of these factors can help you get a lower interest rate.

Besides the mortgage rate, factors such as closing costs, fees, discount points and taxes can also affect the cost of your home. Be sure to shop around with multiple lenders — for example, credit unions and online lenders in addition to local and national banks — to get a loan that’s right for you.

How does the loan term affect my mortgage?

When choosing a mortgage, remember to consider the length of the loan or the payment schedule. The most common mortgage terms are 15 and 30 years, although there are also 10, 20 and 40 year mortgages. Another important distinction is between fixed rate and adjustable rate mortgages. The interest rates for a fixed rate mortgage are the same throughout the life of the loan. Unlike a fixed rate mortgage, an adjustable rate mortgage’s interest rates are only stable for a certain period of time (usually five, seven or 10 years). After that, the rate fluctuates annually depending on the market interest rate.

When choosing between a fixed rate and variable rate mortgage, you need to consider how long you plan to live in your home. For those planning on staying in a new home for the long term, fixed rate mortgages may be the best option. Fixed rate mortgages offer more stability over time compared to adjustable rate mortgages, but adjustable rate mortgages can sometimes offer lower interest rates upfront. However, you might get a better deal with an adjustable rate mortgage if you only plan to keep your home for a few years. The best loan term is entirely up to your situation and goals, so be sure to consider what’s important to you when choosing a mortgage.


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