Mortgage Rates and Payments Keep Rising, Creating Market Misery

Current mortgage rates continue to rise and record payment rates combine to create a glum market.

Graphic of a house with a giant dollar sign leaning on it
(Image credit: Getty Images)

As the Fed continues to raise the Federal Funds rate in an attempt to combat inflation, consumers are facing higher commercial interest rates, especially mortgage rates. On March 10, the current average interest rate for a 30-year fixed mortgage was 7.05%, with refinancing average rates at 7.09%, both down on the previous week, reports Bankrate (opens in new tab). However, we expect mortgage rates to continue rising and so with food, energy and real estate prices remaining high, home ownership can feel extremely challenging at the moment. 

As a result, many first-time buyers are backing out of the market altogether. For current homeowners, a recent survey from Redfin (opens in new tab) reveals that mortgage payments are now the highest they've ever been. The typical homeowner now pays $2,563 on mortgage payments 29% higher than they'd have paid in 2022. Not surprisingly the latest Home Purchase Sentiment report from Fannie Mae (opens in new tab) shows that both homebuyers and owners are feeling increasingly pessimistic about market conditions. Sentiment has lowered — due to worries about job security, rising rates and home sellers are concerned about a potential slump in home prices (which has yet to fully materialize).

Mortgage demand

Recently, mortgage demand plummeted to a 28 year low, with mortgage application volume 44% lower than last year. In fact, The Fannie Mae Home Purchase Sentiment Index (HPSI) (opens in new tab) dropped 3.6 points last month, and now stands at 58.0 out of 100. This decline broke three consecutive monthly increases of the index, and pushed it closer to the lowest point it’s been (56.7 in October 2022). And while mortgage demand did slightly recover last week, rising 7.4%, mortgage interest rates are expected to continue rising this year which could again lower demand. 

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Why are mortgage rates rising

In an attempt to combat the highest inflation seen in almost forty years, the Fed has continued to raise the Federal Funds rate. The overall goal is to drive spending down as consumers realize higher commercial interest rates on not only mortgages but credit card APRs and other loans. Since last year, rates have been raised from near zero to a target range of 4.5% to 4.75%, and additional rate hikes are expected to continue throughout the year, meaning homebuyers will likely be faced with even higher mortgage rates in the coming months. In fact, the level the Federal Funds rate will reach is likely to be higher than once thought, with Federal Reserve Chairman Jerome Powell stating, “The latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated.” 

How to get the lowest rate

Follow these tips to shop for low mortgage rates. 

  • Increase down payment: The bigger the down payment you make on a house, the better your rate. To qualify for the lowest rates you’ll likely need a 20% down payment.  
  • Raise credit score: The most important factor in determining your mortgage rate is your credit score. The higher your score, the less risk you pose to lenders, so it’s important to raise your credit score as much as possible before applying for a mortgage. Typically, you’ll need to have a FICO score of 760 or higher in order to be eligible for the lowest rates.  
  • Consider an adjustable-rate mortgage: An adjustable-rate mortgage (ARM) starts out with rates lower than those you’d get with a fixed-rate mortgage. After a certain time period, the rates will adjust based on market indexes. If you know you will be selling your home in the future, this could be a good option to save on interest.  
  •  Shop around: It’s important to get multiple quotes before applying for a mortgage, and you can often find lower mortgage rates from local lenders and credit unions. Try a mortgage comparison tool to find the best rates for you.

Current mortgage and refinance rates as of March 9, 2023, from Bankrate (opens in new tab)

Swipe to scroll horizontally
Mortgage Rates
30 year fixed7.13%
15 year fixed6.34%
10 year fixed6.38%
5/1 ARM5.88%
Swipe to scroll horizontally
Refinance Rates
30 year fixed refinance7.12%
15 year fixed refinance6.37%
10 year fixed refinance6.38%
5/1 ARM refinance5.8%

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Erin Bendig
Personal Finance Writer

Erin pairs personal experience with research and is passionate about sharing personal finance advice with others. Previously, she was a freelancer focusing on the credit card side of finance, but has branched out since then to cover other aspects of personal finance. Erin is well-versed in traditional media with reporting, interviewing and research, as well as using graphic design and video and audio storytelling to share with her readers.