A couple of principal mortgage rates sank over the last seven days. Both 15-year fixed and 30-year fixed mortgage rates slumped. For variable rates, the 5/1 adjustable-rate mortgage also decreased.

The Federal Reserve announced a 25-basis point increase to its benchmark short-term interest rate on Wednesday. This could have an impact on mortgage rates, but it’s difficult to say just how much for a market already in flux.

“We’re in one of the most volatile markets in terms of rates since 2008,” says Jennifer Beeston, senior vice president at Guaranteed Rate, a national mortgage lender.

Mortgages hit a 20-year high in late 2022, but now the macroeconomic environment is changing again. Rates dipped significantly in January before climbing back up in February. While rates don’t directly track changes to the federal funds rate, they do respond to inflation. Overall, inflation remains high but has been slowly but consistently falling every month since it peaked in June 2022.

After raising rates dramatically in 2022, the Fed opted for smaller, 25-basis-point rate increases in its first two meetings of 2023. The decision to hike by 0.25% this week suggests that inflation is cooling and the central bank may be able to ease up — but not stop — on its rate hikes.

While mortgage rates have dipped a bit from their December 2022 peak, they still aren’t dramatically lower. Fewer buyers are willing to jump into the housing market, driving demand down and causing home prices to ease, but that’s only part of the home affordability equation.

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

What does this mean for homebuyers this year? Mortgage rates are likely to decrease slightly in 2023, although they’re highly unlikely to return to the rock-bottom levels of 2020 and 2021. However, rate volatility may continue for some time. “Expect mortgage rates to yo-yo up and down in the first half of the year, at least until there is a consensus about when the Fed will conclude raising interest rates,” 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 consistently 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 they can for their situation.

“Instead of getting into the minutiae of what the market’s doing every six seconds, buyers need to focus on what it is they’re really trying to accomplish and have a good game plan,” Beeston says.

Take steps to improve your credit score and save for a down payment to increase your odds of qualifying for the lowest rate available. Also, be sure to compare the 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

The 30-year fixed-mortgage rate average is 6.85%, which is a decrease of 12 basis points compared to one week ago. (A basis point is equivalent to 0.01%.) The most frequently used loan term is a 30-year fixed mortgage. A 30-year fixed mortgage will typically have a higher interest rate than a 15-year fixed rate mortgage, but also a lower monthly payment. Although you’ll pay more interest over time — you’re paying off your loan over a longer timeframe — if you’re looking for a lower monthly payment, a 30-year fixed mortgage may be a good option.

15-year fixed-rate mortgages

The average rate for a 15-year, fixed mortgage is 6.09%, which is a decrease of 12 basis points from the same time last week. You’ll definitely have a higher monthly payment with a 15-year fixed mortgage compared to a 30-year fixed mortgage, even if the interest rate and loan amount are the same. But a 15-year loan will usually be the better deal, as long as you can afford the monthly payments. These include typically being able to get a lower interest rate, paying off your mortgage sooner, and paying less total interest in the long run.

5/1 adjustable-rate mortgages

A 5/1 ARM has an average rate of 5.74%, a fall of 5 basis points compared to a week ago. You’ll usually get a lower interest rate (compared to a 30-year fixed mortgage) with a 5/1 ARM in the first five years of the mortgage. But changes in the market might cause your interest rate to increase after that time, as detailed in the terms of your loan. Because of this, an adjustable-rate mortgage may be a good option if you plan to sell or refinance your house before the rate changes. But if that’s not the case, you may be on the hook for a much higher interest rate if the market rates change.

Mortgage rate trends

Mortgage rates were historically low throughout most of 2020 and 2021, but increased steadily throughout 2022. Now, mortgage rates are roughly twice what they were a year ago, pushed up by persistently high inflation. That 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 appealing to keep money in savings, suppressing demand for goods and services.

Mortgage interest rates don’t move in lockstep with the Fed’s actions in the same way that, say, rates for a home equity line of credit do. But they do respond to inflation. As a result, cooling inflation data and positive signals from the Fed will influence mortgage rate movement more than the most recent 25-basis-point rate hike.

We use data collected by Bankrate, which is owned by the same parent company as CNET, to track daily mortgage rate trends. This table summarizes the average rates offered by lenders across the country:

Current average mortgage interest rates

Rates as of March 23, 2023.

How to shop for the best mortgage rate

When you are ready to apply for a loan, you can connect with a local mortgage broker or search online. Make sure to think about your current financial situation and your goals when searching for a mortgage.

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

The interest rate isn’t the only factor that affects the cost of your home. Be sure to also consider additional factors such as fees, closing costs, taxes and discount points. Make sure to shop around with multiple lenders — including credit unions and online lenders in addition to local and national banks — in order to get a mortgage that’s best for you.

What’s the best loan term?

When picking a mortgage, remember to consider the loan term, or payment schedule. The most common mortgage terms are 15 years and 30 years, although 10-, 20- and 40-year mortgages also exist. Another important distinction is between fixed-rate and adjustable-rate mortgages. For fixed-rate mortgages, interest rates are fixed for the life of the loan. Unlike a fixed-rate mortgage, the interest rates for an adjustable-rate mortgage are only set for a certain amount of time (usually five, seven or 10 years). After that, the rate fluctuates annually based on the current interest rate in the market.

When choosing between a fixed-rate and adjustable-rate mortgage, you should consider how long you plan to stay in your house. For those who plan on living long-term in a new house, fixed-rate mortgages may be the better option. Fixed-rate mortgages offer more stability over time compared to adjustable-rate mortgages, but adjustable-rate mortgages might offer lower interest rates upfront. However, you could get a better deal with an adjustable-rate mortgage if you only plan to keep your home for a couple years. There is no best loan term as an overarching rule; it all depends on your goals and your current financial situation. Make sure to do your research and know your own priorities when choosing a mortgage.