Today's Mortgage and Refinance Rates: March 11, 2023 | Hot Job Market Keeps Rates High
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Mortgage rates increased significantly last month and have remained elevated over the past couple of weeks.
On Friday, the Bureau of Labor Statistics released its February jobs report, which showed that the US economy again added more jobs than expected last month.
Why does this matter for mortgage rates? The Federal Reserve spent most of last year fighting inflation with aggressive hikes to the federal funds rate, and investors generally expected the central bank to slow its pace of increases in 2023. But Fed officials have repeatedly indicated that the labor market is one of the main areas they're watching for signs that their tightening is working.
Though Fed rate hikes don't directly move mortgage rates, investor expectations of how Fed policy decisions will affect the economy can. A hot labor market indicates that inflation is still a problem, which means the Fed will likely continue raising rates. This has helped keep mortgage rates high.
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30-Year Fixed Mortgage Rates
The current average 30-year fixed mortgage rate is 6.73%, according to Freddie Mac. This is an increase from the previous week.
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
The average 15-year fixed mortgage rate is 5.95%, an increase from the prior week, according to Freddie Mac data.
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.
How Do Fed Rate Hikes Affect Mortgages?
The Federal Reserve has been increasing the federal funds rate to try to slow economic growth and get inflation under control. So far, inflation has slowed somewhat, but it's still well above the Fed's 2% target rate.
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 starts to come 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 stop hiking rates until it sees sustained signs of slowing inflation.
When Will Mortgage Rates Go Down?
Mortgage rates increased dramatically in 2022, but they're expected to trend down later this year.
In January 2023, the Consumer Price Index rose 6.4% year-over-year, a slight slowdown compared to the previous month. This is good news for mortgage borrowers and the broader economy.
As inflation comes down, mortgage rates likely will, too. But the Fed is looking for sustained signs of slowing inflation, which means it's not likely to stop hiking rates any time soon, though officials have said they expect to start slowing the pace of hikes. This should help ease the upward pressure on mortgage rates.
Are HELOCs a Good Idea Right Now?
Many homeowners gained a lot of equity over the past few years as home prices increased at an unprecedented rate. But because rates are so high now, tapping into that equity can be expensive.
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 still be a good option.
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.
Depending on your finances and the type of HELOC you get, you may be able to get a better rate with a HELOC than you would with a home equity loan or a cash-out refinance. Just keep in mind that HELOC rates are variable, so if rates start to trend up further, yours will likely increase, as well.