Today's Mortgage and Refinance Rates: July 26, 2023 | After Spiking Earlier This Month, Rates Have Calmed

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Mortgage rates spent the first half of July climbing, but they've since receded a bit and are now holding steady. Average 30-year mortgage rates are currently flat compared to last week.

But mortgage rates are still more than a full percentage point higher than they were a year ago, and they're more than four percentage points above the historic lows of the pandemic, when many homeowners got their current mortgages.

This has led to a "lock-in effect," where homeowners who might otherwise be interested in selling their homes stay put to avoid having to take on a new mortgage with a significantly higher rate. According to CoreLogic data, 99% of outstanding mortgage debt had a rate below 6% in August 2022 — and rates have only increased since then.

This lock-in effect has further limited already-tight inventory and slowed homebuying activity. Existing-home sales dropped 18.9% year-over-year in June, according to the National Association of Realtors.

"There are simply not enough homes for sale," NAR chief economist Lawrence Yun said in a press release. "The market can easily absorb a doubling of inventory."

But mortgage rates are expected to drop soon, as inflation slows and the Federal Reserve is able to stop hiking the federal funds rate. This should allow hopeful homebuyers currently waiting on the sidelines to jump back into the market.

"The pent-up demand will surely be realized soon, especially if mortgage rates and inventory move favorably," Yun said.

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Use our free mortgage calculator to see how today's mortgage rates would impact your monthly payments. By plugging in different rates and term lengths, you'll also understand how much you'll pay over the entire length of your mortgage.

Click "More details" for tips on how to save money on your mortgage in the long run.

30-year Fixed Mortgage Rates

The current average 30-year fixed mortgage rate is 6.78%, according to Freddie Mac. This is an 18-point decrease 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 6.06%, down 24 points 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.

When Will Mortgage Rates Go Down?

Mortgage rates started ticking up from historic lows in the second half of 2021 and increased over three percentage points in 2022. Though rates had initially been trending down this year, they've since ticked back up. 

As inflation comes down, mortgage rates will recede somewhat as well. If we experience a recession, rates may drop a little faster. But average 30-year fixed rates will likely remain somewhere in the 6% to 7% range throughout 2023.

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 Federal Reserve has been increasing the federal funds rate this year to try to slow economic growth and get inflation under control. So far, inflation has slowed, but it's still 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.