Today's Mortgage Rates & Trends - January 5, 2023: Rates fall further

For a third day, rates on 30-year mortgages have declined by double digits, dropping the average 45 basis points since extending well above 7% last week.

Today's National Mortgage Rate Averages

Thirty-year mortgage rates saw another day of decline Wednesday. The flagship average gave up 12 basis points, following a drop of 33 basis points the previous two days. The average is now down to 6.72% after touching 7.17% less than a week ago. The average is currently 86 basis points cheaper than the 20-year high of 7.58% that was notched in October.

The 15-year average also dropped Wednesday, but by a modest four basis points to 6.03%. However, that takes the current 15-year average a full point below its fall peak of 7.03%, which was its highest level in 15 years.

Jumbo 30-year rates meanwhile marched in place Wednesday, holding at 5.90%. That average is only about a third of a percentage point under its October high of 6.27%, a level not seen since 2010.

Refinancing rates for 30-year and 15-year loans moved somewhat differently Wednesday from their new purchase counterparts. The 30-year refi average dipped only six basis points while the 15-year refi average plunged 21 points. The Jumbo 30-year average was flat. The cost to refinance for 30 years is currently 58 basis points more expensive than new purchase 30-year 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.