Today’s Mortgage, Refinance Rates: Jan. 3, 2023

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Average 30-year fixed mortgage rates have decreased over the past two months. Most major forecasts expect rates to trend down further throughout this year and 2024, which is good news for homeowners looking to refinance.

In 2022, interest in refinancing plummeted as rates reached their highest levels in decades. As rates start trending back down, those who got their mortgages when rates peaked will have an opportunity to save money with a refinance.

Refinancing replaces your current mortgage with a new one. If you get a lower rate on your new mortgage, you can reduce your mortgage payment, giving you more space in your monthly budget.

Current mortgage rates

Current refinance rates

Mortgage calculator

Use our free mortgage calculator to see how today’s mortgage rates would impact your monthly payments. By plugging in different rates and term lengths, you’ll also understand how much you’ll pay over the entire length of your mortgage.

Click “More details” for tips on how to save money on your mortgage in the long run.

30-year fixed mortgage rates

The current average 30-year fixed mortgage rate is 6.27%, according to Freddie Mac. This is a decrease from the previous week.

The 30-year fixed-rate mortgage is the most common type of home loan. With this type of mortgage, you’ll pay back what you borrowed over 30 years, and your interest rate won’t change for the life of the loan.

The lengthy 30-year term allows you to spread out your payments over a long period of time, meaning you can keep your monthly payments lower and more manageable. The trade-off is that you’ll have a higher rate than you would with shorter terms or adjustable rates. 

15-year fixed mortgage rates

The average 15-year fixed mortgage rate is 5.69%, a slight increase from the prior week, according to Freddie Mac data.

If you want the predictability that comes with a fixed rate but are looking to spend less on interest over the life of your loan, a 15-year fixed-rate mortgage might be a good fit for you. Because these terms are shorter and have lower rates than 30-year fixed-rate mortgages, you could potentially save tens of thousands of dollars in interest. However, you’ll have a higher monthly payment than you would with a longer term.

Should I get a HELOC? Pros and cons

If you’re looking to tap into your home’s equity, a HELOC might be the best way to do so right now — especially considering how much home prices have increased over the past couple of years. Unlike a cash-out refinance, you won’t have to get a whole new mortgage with a new interest rate, and you’ll likely get a better rate than you would with a home equity loan.

But HELOCs don’t always make sense. It’s important to consider the pros and cons.

HELOC pros

• Only pay interest on what you borrow
• Typically have lower rates than alternatives, including home equity loans, personal loans, and credit cards
• If you have a lot of equity, you could potentially borrow more than you could get with a personal loan

HELOC cons

• Rates are variable, meaning your monthly payments could go up
• Taking equity out of your home can be risky if property values decline or you default on the loan
• Minimum withdrawal amount may be more than you want to borrow

When will mortgage rates go down?

Mortgage rates started ticking up from historic lows in the second half of 2021 and have increased over three percentage points since January 2022. But rates have recently trended down, and they’ll likely decrease further in 2023 and 2024. 

However, rates aren’t likely to drop dramatically any time soon. As inflation starts to come down, mortgage rates will recede somewhat as well. If we experience a recession, rates may drop a little faster. But average 30-year fixed rates will likely remain somewhere in the 5% to 6% range throughout 2023.

How do Fed rate hikes affect mortgages?

The Federal Reserve has been increasing the federal funds rate this year to try to slow economic growth and get inflation under control. So far, inflation has slowed somewhat, but it’s still well above the Fed’s 2% target rate.

Mortgage rates aren’t directly impacted by changes to the federal funds rate, but they often trend up or down ahead of Fed policy moves. This is because mortgage rates change based on investor demand for mortgage-backed securities, and this demand is often impacted by how investors expect Fed hikes to affect the broader economy. 

As inflation starts to come down, mortgage rates should, too. But the Fed has indicated that it’s watching for sustained signs of slowing inflation, and it’s not going to stop hiking rates any time soon — though it may start opting for smaller hikes at its next few meetings.