Mortgage industry insights

30-year fixed rate above 6 percent — a first since 2008

The benchmark fixed rate on 30-year mortgages topped 6 percent in September, its highest level since November 2008, according to Bankrate’s national survey of large lenders.

“Mortgage rates are moving above 6 percent as the Fed’s message of ‘higher rates for longer’ is sinking in,” says Greg McBride, chief financial analyst for Bankrate.

After rapidly rising in the early months of 2022, the 30-year fixed mortgage rate started to waver in June, approaching 6 percent, then settling into the 5s. Federal Reserve policy doesn’t directly impact rates on fixed mortgages, but for a time, the central bank’s moves reduced 10-year Treasury yields, which do drive fixed mortgage movement.

The Fed’s actions affect adjustable-rate mortgages (ARMs) and home equity products, however. Each time the central bank raises its key rate, variable home loan rates move in tandem.

Whatever type of mortgage you’re looking for, in this environment, it’s more important than ever to compare rates before selecting a lender.

“Conducting an online search can save thousands of dollars by finding lenders offering a lower rate and more competitive fees,” says McBride.

Read more: This week’s latest mortgage news

How to compare 30-year fixed mortgage rates

If you compare loan offers from mortgage lenders, you’ll have a better chance of securing a competitive rate. Here’s how to compare:

1. Get preapprovals from at least three mortgage lenders, ideally on the same day so you have an accurate basis for comparison. Lenders determine your interest rate based on your credit score, debt-to-income (DTI) ratio and other factors.
2. When reviewing rate quotes, compare the annual percentage rate (APR), which generally reflects all the expenses you’ll incur for the loan, such as the origination fee and any points.
3. Aside from APR, consider each lender’s fees — some don’t charge an origination fee, for example — and other factors beyond the numbers, such as convenience or responsiveness.

Why compare 30-year mortgage rates?

It’s important to shop around when you’re looking for a mortgage to make sure you’re getting the best deal. Bankrate’s mortgage amortization calculator shows how even a 0.1 percent difference on your rate can translate to thousands of dollars you could have to pay out over the life of the loan.

Bankrate can help you connect with below-average rate offers to help you save even more.

When to consider a 30-year fixed mortgage

A 30-year fixed mortgage is best for those looking for predictable, relatively low monthly payments. You’ll wind up paying more in interest over the life of a 30-year mortgage than a 15- or 20-year one, but because of the longer repayment timeline, your monthly costs will be lower, so the more expensive loan may ultimately be easier on your budget.

Pros and cons of a 30-year mortgage

Choosing the right home loan is an important step in the home-buying process, and you have options based on your credit score, income, down payment amount, budget and financial goals. Here are the main pros and cons of a 30-year fixed mortgage:

Pros

• Lower monthly payment: Repaying a mortgage over 30 years means you’ll have lower, more affordable payments spread out over time compared to shorter-term loans like 15-year mortgages.
• Stability: Having a consistent principal and interest payment helps you better map out your housing expenses for the long term. (Your overall monthly housing expenses can change, however, if your homeowners insurance and property taxes go up or down.) Of course, this is only true if your mortgage has a fixed rate. An adjustable-rate mortgage won’t give you this same benefit for the whole life of the loan.
• Buy more house: With lower payments, you might be able to qualify for a larger loan amount and may be able to afford a more expensive home.
• More wiggle room: Lower monthly payments can provide more cushion in your budget for other goals, like saving for emergencies, retirement, college tuition or home repairs and maintenance.

Cons

• More total interest paid: Stretching out repayment over 30 years means you’ll wind up paying more in interest overall than you would with a shorter-term loan.
• Higher mortgage rates: Lenders usually charge higher interest rates for 30-year loans because they’re taking on the risk of not being repaid for a longer amount of time.
• Becoming house poor: Just because you might be able to afford more house with a 30-year loan doesn’t mean you should overstretch your budget. Give yourself some breathing room for other financial goals and unexpected expenses.
• Slower equity growth: It will take longer to build equity in your home because most of your initial mortgage payments will go towards interest rather than paying down your principal amount.

FAQs about 30-year mortgages

• What is a 30-year fixed mortgage?

  A fixed-rate mortgage has an interest rate that doesn’t change over the full term of the loan, which, for a 30-year mortgage (as the name suggests) is 30 years. It’s a popular choice for many homebuyers because its stable monthly principal and interest payments are ideal for predictable monthly household budgets.

• How are 30-year mortgage rates set?

  Mortgage rates in general are influenced by a variety of factors, which means there’s no one specific rate available in the market at any time. Fixed mortgage rates are influenced by the 10-year Treasury yield and, more broadly, Federal Reserve policy, which affects borrowing costs for banks that then get passed onto customers who take out loans. On a more granular level, every mortgage applicant is evaluated based on credit score, employment history, income, existing debts and other factors, all of which influence what rate a lender will offer you.

• What are the differences between 15- and 30-year mortgages?

  During the height of the pandemic, 15-year mortgages had a bit of a renaissance, as low interest rates made them affordable to more borrowers than ever. With rates rising, more homeowners and buyers need to crunch the numbers to see what makes the most sense. The key question: What is your priority? If you value low monthly payments, a longer-term loan makes more sense. If you can afford it and want to pay off your mortgage quickly and are more concerned with paying less in interest overall, a 15-year loan is probably right for you.

  Learn more: 15-year vs. 30-year mortgages

• What is the difference between a fixed- and adjustable-rate mortgage?

  Fixed-rate mortgages are the most common type of loan because the steady interest rate means predictable monthly payments for the life of the loan. Adjustable-rate mortgages, on the other hand, might have lower interest rates and payments initially, but after a set fixed period, the rate will start to change periodically. That can be great when mortgage rates are low, but if rates for new loans go up, so will yours, and your payments along with it.

  Learn more: ARMs vs. fixed-rate mortgages

• When should you refinance your 30-year mortgage?

  It’s generally a good idea to refinance your 30-year fixed mortgage into a new loan if you can get a lower interest rate, lower your monthly payment or improve your financial situation in another way. However, if you’re several years into repaying your loan and you refinance into a new 30-year mortgage, you’ll be paying more total interest in the long run by starting the repayment clock from scratch again.

  You’ll also need to determine if the closing costs on your new loan outweigh the savings you’ll gain from lower monthly payments over time. When you refinance a 30-year mortgage, you’ll pay lender origination fees and third-party fees for an appraisal and other closing costs. Most lenders also require you to have at least 20 percent equity in your home to refinance, so make sure you qualify before planning a new budget for yourself.

  If you can, consider refinancing a 30-year mortgage into a shorter loan, which will avoid lengthening your overall repayment period and help you save on interest. Keep in mind, though, you might have a higher monthly payment depending on where you are in the amortization schedule.

  Learn more: How to refinance your mortgage

Other mortgage tools:

• Mortgage calculator: estimate your monthly payment and see how much house you can afford
• Compare today's top refinance rates: lower your monthly mortgage payment
• First time home buyers grants and programs: get financial assistance to lower your down payment and closing costs