Mortgages Explained: Rates Climb Above 6%

Mortgage rates are influenced by two main types of factors: those you can control and those you can’t. On the personal side, lenders typically offer better rates to borrowers with strong credit scores, lower debt relative to income, and larger down payments. Comparing lenders can also help you secure a lower rate. When the economy is weak, rates often drop to encourage borrowing. When it’s strong, rates tend to rise to slow spending.

15-Year vs. 30-Year Mortgages

The two most common loan options are 15-year and 30-year fixed mortgages.

• 30-year loans have lower monthly payments but higher interest rates, meaning you pay more over time.

• 15-year loans usually have lower rates and less total interest, but higher monthly payments.

In short, 30-year loans are easier month-to-month, while 15-year loans are cheaper long-term.

How Mortgage Rates Work

A mortgage rate is the cost of borrowing money, expressed as a percentage.

• Fixed-rate mortgages stay the same for the entire loan.

• Adjustable-rate mortgages (ARMs) start with a fixed rate, then change over time based on market conditions.

Early in the loan, most payments go toward interest. Over time, more goes toward paying down the principal.

Current Rate Snapshot

Mortgage rates have climbed back over 6%, and it’s mostly because of inflation worries and overall economic uncertainty. Things had started to level out a bit, but rates are rising again as the market reacts to things like gas prices, global issues, and what the Federal Reserve might do next.

Right now, a 30-year fixed mortgage is sitting just above 6%, with 15-year loans a little lower. Adjustable-rate mortgages are in a similar range, so there’s not a huge difference in options at the moment.

A big reason for this is that the Fed hasn’t started cutting interest rates yet, and bond yields are going up, which pushes mortgage rates higher. Basically, borrowing money just costs more right now.

Even with higher rates, people are still buying homes, especially heading into the spring market. But refinancing hasn’t really picked up, since most homeowners already locked in much lower rates a few years ago.