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Today’s Mortgage Rates & Trends – October 5, 2022: Rates recede

Mortgage rates again moved a notable increment lower Tuesday, resulting in an almost two-tenths of a point drop so far in October’s 30-year average. Now sitting in high 6% territory, it was just a week ago that the flagship average recorded a 20-year high in the mid-7% range.

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 National Mortgage Rate Averages

Rates on 30-year mortgages took another step downward Tuesday, accumulating a three-day decline. The 30-year average ended September right at 7.00%, after hitting 7.42% just three days earlier. Tuesday’s drop of 10 basis points has now lowered the 30-year average to 6.81%.

The 15-year average moved more dramatically lower Tuesday, shedding a full quarter percentage point to land at 6.29%. Like 30-year loans, 15-year rates had climbed more than a full percentage point in mid-September, last Tuesday notching a peak of 6.66% that is the average’s highest reading since at least 2008.

Jumbo 30-year rates meanwhile gave up about an eighth of a point, reducing the average to 5.77%. Though not quite as historically elevated as the standard 30-year and 15-year averages, Jumbo 30-year rates had last week reached their most expensive point since 2010, at 6.02%.

Refinancing rates for 30-year loans declined more than new purchase rates Tuesday, subtracting 16 basis points, while Jumbo 30-year loans moved about the same, giving up an eighth of a point. But compared to Tuesday’s big drop in 15-year new purchase rates, the 15-year refi average held steady. The cost to refinance with a fixed-rate loan is currently one to 57 points higher than new purchase loans.

After a major rate dip last summer, mortgage rates skyrocketed in the first half of 2022, with the 30-year average hitting a mid-June peak almost 3.5 percentage points above its August 2021 floor of 2.89%. But September’s surge dramatically outdid the summer high, with the 30-year average spiking 1.27 percentage points over just 16 days to reach 1.04 percentage points higher than June’s peak.

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. They 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 given the value of the home.

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

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 term, 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 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 have kept the mortgage market relatively low for much of this year. In particular, the Federal Reserve has been buying billions of dollars of bonds in response to the pandemic’s economic pressures, and it continues to do so. This bond-buying policy (and not the more publicized federal funds rate) is a major influencer on mortgage rates.

Since June, the Fed has been reducing its balance sheet. Identical sizable reductions occurred monthly through the summer and are being accelerated in September. This is on top of its plan to reduce new bond purchases by an increment every month, the so-called taper, which began in November.

The Fed’s rate and policy committee, called the Federal Open Market Committee (FOMC), meets every six to eight weeks. Their next scheduled meeting takes place November 1-2.

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.

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