A few major mortgage rates moved higher over the last seven days. The average interest rates for both 15-year fixed and 30-year fixed mortgages increased. At the same time, average rates for 5/1 adjustable-rate mortgages also rose.

On the heels of cooling inflation, the Federal Reserve announced on May 3 a 25-basis-point increase to its benchmark short-term interest rate. The Fed’s May meeting marks what could be the last increase we see for the time being. The central bank has signaled that it may soon be time to pause on rate hikes. Depending on incoming inflation data, the next step would be to hold rates where they are for an extended period of time in order to bring inflation down to its 2% target.

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

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. Throughout March and April, rates fluctuated in the 6% range.

“Ultimately, more certainty about the Fed’s actions will help to smooth out some of the volatility we have seen with mortgage rates,” says Odeta Kushi, deputy chief economist at First American Financial Corporation.

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 three meetings of 2023. The decision to hike by 0.25% on May 3 suggests that inflation is cooling and the central bank may soon be able to pause its rate hiking regime. While the central bank is unlikely to cut rates any time soon, positive signaling from the Fed and cooling inflation may ease some of the upward pressure on mortgage rates.

“If inflation keeps coming down, that will be the biggest driver, outside of the Fed, that’s really going to help bring rates down to a better level and improve affordability for home buyers,” says Scott Haymore, head of capital markets and mortgage pricing at TD Bank.

However, mortgage rates remain well above where they were a year ago. Fewer buyers are willing to jump into the housing market, driving demand down and causing home prices in some regions 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.

“The most important thing is that they find the right home. The second most important thing is obviously to find 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 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

For a 30-year, fixed-rate mortgage, the average rate you’ll pay is 7.06%, which is an increase of 12 basis points from seven days ago. (A basis point is equivalent to 0.01%.) Thirty-year fixed mortgages are the most common loan term. A 30-year fixed mortgage will often 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 house as quickly and you’ll pay more interest over time, but a 30-year fixed 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 6.47%, which is an increase of 20 basis points from seven days ago. You’ll definitely have a bigger 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, if you can afford the monthly payments. You’ll usually get a lower interest rate, and you’ll pay less interest in total because you’re paying off your mortgage much quicker.

5/1 adjustable-rate mortgages

A 5/1 adjustable-rate mortgage has an average rate of 5.97%, a climb of 20 basis points from the same time last week. For the first five years, you’ll typically get a lower interest rate with a 5/1 adjustable-rate mortgage compared to a 30-year fixed mortgage. However, shifts in the market could cause your interest rate to increase after that time, as detailed in the terms of your loan. Because of this, an ARM could be a good option if you plan to sell or refinance your house before the rate changes. If not, changes in the market might significantly increase your interest rate.

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 to track daily mortgage rate trends. This table summarizes the average rates offered by lenders across the US:

Today’s mortgage interest rates

Rates as of May 24, 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. In order to find the best home mortgage, you’ll need to take into account your goals and current finances.

Things that affect the mortgage rate you might get include: your credit score, down payment, loan-to-value ratio and your debt-to-income ratio. Generally, you want a good credit score, a higher down payment, a lower DTI and a lower LTV to get a lower interest rate.

Aside from the interest rate, other factors including closing costs, fees, discount points and taxes might also impact the cost of your house. Make sure to shop around with multiple lenders — like credit unions and online lenders in addition to local and national banks — in order to get a mortgage that’s right for you.

What is a good loan term?

One important factor to consider when choosing a mortgage is the loan term, or payment schedule. The most common loan 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. The interest rates in a fixed-rate mortgage are stable for the duration of the loan. Unlike a fixed-rate mortgage, the interest rates for an adjustable-rate mortgage are only stable for a certain amount of time (commonly five, seven or 10 years). After that, the rate fluctuates annually based on the market rate.

When deciding between a fixed-rate and adjustable-rate mortgage, you should consider how long you plan to live in your house. If you plan on staying long-term in a new house, fixed-rate mortgages may be the better option. While adjustable-rate mortgages might offer lower interest rates upfront, fixed-rate mortgages are more stable over time. If you don’t plan to keep your new house for more than three to 10 years, though, an adjustable-rate mortgage might give you a better deal. There is no best loan term as an overarching rule; it all depends on your goals and your current financial situation. Be sure to do your research and know what’s most important to you when choosing a mortgage.