Today's Mortgage Rates & Trends - December 28, 2022: Rates spike

Rates on 30-year mortgages jumped almost two-tenths of a percentage point Tuesday, after a similar gain over the previous two days. That takes the flagship 30-year average to its December high, and almost returning to the 7% threshold.

Today's National Mortgage Rate Averages

Thirty-year mortgage rates started the week with continued upward movement, tacking on another 19 basis points Tuesday after adding 22 points at the end of last week. The 30-year average is now up to 6.95%, its highest level this month. Since reading 7.02% on November 30, the average had been bobbing around in a lower range of 6.40% and 6.76%. Still, the current average is well below October's 20-year high of 7.58%.

The 15-year average meanwhile climbed just slightly, edging up five basis points to 6.16%. Rates on 15-year loans are currently 0.87% lower on average than the fall peak of 7.03%, which was the highest reading in 15 years.

Jumbo 30-year rates remained flat Tuesday, holding at 5.90%. The average is just 37 basis points cheaper than its October high of 6.27%, a level not previously seen since 2010.

Refinancing rates were relatively unchanged Tuesday. The 30-year refi average climbed a minor three basis points and both the 15-year and Jumbo 30-year averages marched in place. The cost to refinance for 30 years is now 46 basis points more expensive than a new purchase 30-year loan.

After a historical rate plunge in August 2021, mortgage rates skyrocketed in the first half of 2022. Indeed, the 30-year average's mid-June peak of 6.38% was almost 3.5 percentage points above its summer 2021 trough of 2.89%. But the surge in September and October dramatically outdid the summer high, with the 30-year average ultimately reaching 1.2 percentage points higher than the June peak.

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What Causes Mortgage Rates to Rise or Fall?

Mortgage rates are determined by a complex interaction of macroeconomic and industry factors, such as the level and direction of the bond market, including 10-year Treasury yields; the Federal Reserve's current monetary policy, especially as it relates to funding government-backed mortgages; and competition between lenders and across loan types. Because fluctuations can be caused by any number of these at once, it's generally difficult to attribute the change to any one factor.

Macroeconomic factors had kept the mortgage market relatively low for much of 2021. In particular, the Federal Reserve had been buying billions of dollars of bonds in response to the pandemic's economic pressures. This bond-buying policy (and not the more publicized federal funds rate) is a major influencer on mortgage rates.

But starting last November, the Fed began tapering its bond purchases downward, making sizable reductions each month until reaching net-zero in March 2022.

The Fed's rate and policy committee, called the Federal Open Market Committee (FOMC), meets every six to eight weeks. Their next scheduled meeting will conclude February 1.

Methodology

The national averages cited above were calculated based on the lowest rate offered by more than 200 of the country's top lenders, assuming a loan-to-value ratio (LTV) of 80% and an applicant with a FICO credit score in the 700–760 range. The resulting rates are representative of what customers should expect to see when receiving actual quotes from lenders based on their qualifications, which may vary from advertised teaser rates.

For our map of the best state rates, the lowest rate currently offered by a surveyed lender in that state is listed, assuming the same parameters of an 80% LTV and a credit score between 700–760.