Today's Mortgage Rates & Trends - January 19, 2023: Rates drop

Mortgage rates across the board saw notable declines Wednesday, with the 30-year average setting a new recent low and hitting its cheapest level in more than four months.

Today's National Mortgage Rate Averages

Rates on 30-year mortgages took a major step downward Wednesday, with the flagship average sinking 17 basis points to rest at 6.25%. Last week's 6.35% reading was the first time the 30-year average had dipped below 6.40% since September 12. The current average is now 1.33% cheaper than October's 20-year high of 7.58%.

Wednesday's 15-year average similarly declined, shedding 18 basis points to drop to 5.35%. The 15-year average is down even further from its fall peak, sitting 1.68 percentage points below its October high of 7.03%. That reading was the average's most expensive level in 15 years.

Jumbo 30-year rates meanwhile subtracted an eighth of a percentage point, dropping Wednesday to 5.40%. Compared to its own October peak, the Jumbo 30-year average is now seven-eighths of a percentage point below that 12-year high of 6.27%.

Wednesday's refinancing rates moved lower by almost as much, with the 30-year and Jumbo 30-year refi averages both declining 13 points and the 15-year refi average giving up 14 points. The cost to refinance for 30 years is now 33 basis points pricier than 30-year new purchase loans.

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.