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Mortgage Rates See Biggest Drop in Three Months

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After notching a new 22-year high on Thursday, 30-year mortgage rates retreated dramatically Friday, registering their biggest one-day rate drop since the end of May. The 30-year refi average also plunged.

The latest 30-year fixed-rate average is 7.63%. Rates vary widely across lenders, so it’s always smart to shop around for your best mortgage option and compare rates regularly, no matter what type of loan you’re in the market for.

National Averages of Lenders’ Best Rates
Loan Type
New Purchase
Refinance
30-Year Fixed
7.63%
8.00%
FHA 30-Year Fixed
7.53%
7.81%
Jumbo 30-Year Fixed
6.90%
6.90%
15-Year Fixed
7.07%
7.17%
5/6 ARM
7.41%
7.52%
National averages of the lowest rates offered by more than 200 of the country’s top lenders, with a loan-to-value ratio (LTV) of 80%, an applicant with a FICO credit score of 700–760, and no mortgage points.

Today’s Mortgage Rate Averages: New Purchase

Rates on 30-year new purchase mortgages sank 21 basis points Friday, reversing much of a three-day climb that had pushed the flagship average to its highest point since 2001. That record reading Thursday was 7.84%, and the average is now down to 7.63%. Friday’s decline was the largest one-day drop for 30-year rates since May 30.

Important

When Freddie Mac released its weekly mortgage averages Aug. 24, it revealed that 30-year rates had hit a 22-year high. The Freddie Mac average that week was 7.23%, its highest reading since June 2001. The average has since dipped to 7.12%.

Freddie Mac’s averages differ from the averages we publish here due to Freddie Mac calculating a weekly average that blends five previous days of rates, and which may include loans priced with discount points. In contrast, Investopedia’s averages indicate daily rate movement and only include zero-point loans.

Rates on 15-year loans dropped back more modestly Friday. Dipping just 6 basis points, the 15-year average has lowered to 7.07%. That leaves it a tenth of a percentage point lower than the 21-year high-water mark of 7.17% that was reached in August.

Jumbo 30-year rates were flat for a third day Friday, holding at a 6.90% average. Daily jumbo averages are not available before 2009, but it’s fair to assume Aug. 22’s jumbo 30-year peak of 7.02% was also the most expensive level reached in at least 20 years.

Almost all new purchase rate averages declined Friday, with only the jumbo 15-year average showing a minimal increase. In addition to the jumbo 30-year average, the averages for 5/6 ARM and jumbo 5/6 ARM loans marked time Friday.

National Averages of Lenders’ Best Rates – New Purchase
Loan Type
New Purchase Rates
Daily Change
30-Year Fixed
7.63%
-0.21
FHA 30-Year Fixed
7.53%
-0.26
VA 30-Year Fixed
7.54%
-0.16
Jumbo 30-Year Fixed
6.90%
No Change
20-Year Fixed
7.55%
-0.24
15-Year Fixed
7.07%
-0.06
FHA 15-Year Fixed
7.28%
-0.02
Jumbo 15-Year Fixed
6.90%
+0.01
10-Year Fixed
7.02%
-0.08
10/6 ARM
7.46%
-0.15
7/6 ARM
7.44%
-0.26
Jumbo 7/6 ARM
6.71%
-0.12
5/6 ARM
7.41%
No Change
Jumbo 5/6 ARM
6.81%
No Change

Today’s Mortgage Rate Averages: Refinancing

Refinancing rates for 30-year loans dropped more dramatically than new purchase loans Friday, with the 30-year refi average plummeting 26 basis points. That leaves the spread between 30-year new purchase and refi rates at 37 basis points. The 15-year refi average meanwhile subtracted just 2 basis points and the jumbo 30-year refi average held steady like its new purchase sibling.

The 5/6 ARM refi average was the only reading to increase among refi rates, rising 5 basis points.

National Averages of Lenders’ Best Rates – Refinance
Loan Type
Refinance Rates
Daily Change
30-Year Fixed
8.00%
-0.26
FHA 30-Year Fixed
7.81%
-0.13
VA 30-Year Fixed
7.82%
-0.10
Jumbo 30-Year Fixed
6.90%
No Change
20-Year Fixed
7.91%
-0.16
15-Year Fixed
7.17%
-0.02
FHA 15-Year Fixed
7.24%
-0.04
Jumbo 15-Year Fixed
6.87%
-0.03
10-Year Fixed
7.13%
-0.04
10/6 ARM
7.80%
-0.09
7/6 ARM
7.66%
-0.12
Jumbo 7/6 ARM
6.81%
-0.13
5/6 ARM
7.52%
+0.05
Jumbo 5/6 ARM
6.81%
No Change

Calculate monthly payments for different loan scenarios with our Mortgage Calculator.

The rates you see here generally won’t compare directly with teaser rates you see advertised online, since those rates are cherry-picked as the most attractive, while these rates are averages. Teaser rates may involve paying points in advance, or they may be selected based on a hypothetical borrower with an ultra-high credit score or taking a smaller-than-typical loan. The mortgage rate you ultimately secure will be based on factors like your credit score, income, and more, so it may be higher or lower than the averages you see here.

Lowest Mortgage Rates by State

The lowest mortgage rates available vary depending on the state where originations occur. Mortgage rates can be influenced by state-level variations in credit score, average mortgage loan type, and size, in addition to individual lenders’ varying risk management strategies.

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 mortgage 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 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 is a major influencer on mortgage rates.

But starting in Nov. 2021, the Fed began tapering its bond purchases downward, making sizable reductions each month until reaching net-zero in March 2022.

The federal funds rate, which is set every six to eight weeks by the Fed’s rate and policy committee—the Federal Open Market Committee (FOMC)—can also influence mortgage rates. However, it does not directly drive mortgage rates, and in fact, the fed funds rate and mortgage rates can move in opposite directions.

At its latest meeting, which concluded on July 26, the Fed hiked rates by a widely expected 25 basis points, raising the fed funds rate to a range of 5.25% to 5.50%. Fed Chairman Jerome Powell said that because inflation is still above the Fed’s target rate of 2%, the rate-setting committee could either raise rates again or pause when it meets on Sept. 20, depending on economic conditions.

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.

Investopedia / Alice Morgan

Article Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our
editorial policy.

Freddie Mac. “The 30-Year Fixed-Rate Mortgage Reaches its Highest Level in Over Twenty Years.”

Congressional Research Service. “Federal Reserve: Tapering of Asset Purchases,” Page 1.

Board of Governors of the Federal Reserve System. “FOMC Meeting Calendar.”

Federal Reserve. “Transcript of Chair Powell’s Press Conference July 26, 2023.”

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