A sudden banking crisis has caused a decline in mortgage rates. After the failures of Silicon Valley Bank and Signature Bank in recent days, the average rate on a 30-year home loan fell to 6.66 percent this week, down from 6.84 percent last week, according to Bankrate’s national survey of large lenders.

The Federal Reserve continues to battle inflation, a campaign that had been pushing rates up. “Financial instability risk now must be a factor in any further Fed tightening decision,” says Susan Wachter, a finance and real estate professor at the University of Pennsylvania’s Wharton School. “The mortgage rate decline reflects this.”

Mortgage rates rose steeply for most of 2022, topping 7 percent in November. They retreated from that autumn peak, but they remain well above their 2021 lows of less than 3 percent. The run-up has roiled the housing market. The National Association of Realtors reports that home sales have fallen for 12 consecutive months, and prices are softening in many parts of the country.

The Fed has been moving aggressively to control inflation. The central bank has raised rates at eight consecutive meetings. Those moves have created upward pressure on rates — while also intensifying the risk of a recession.

The Fed is expected to raise rates yet again this month — the question is how much. Strong jobs reports plus persistent inflation had been pushing the central bank to move forcefully on rate increases. But a banking crisis could force the Fed to act more cautiously.

While its moves are influential, the Fed doesn’t directly set fixed mortgage rates. The most relevant benchmark is the 10-year Treasury yield, which also has bounced around in recent weeks.

The 30-year fixed mortgages in this week’s survey had an average total of 0.35 discount and origination points.

Over the past 52 weeks, the benchmark 30-year fixed-rate mortgage has averaged 6.09 percent. A year ago, the 30-year fixed-rate mortgage was 4.14 percent. Four weeks ago, the rate was 6.44 percent. The 30-year fixed-rate average for this week is 2.26 percentage points higher than the 52-week low of 4.4 percent.

As for other loans:

Where mortgage rates are headed

Mortgage experts expect to see rates decrease by the end of 2023 as the Fed’s round of rate hikes draws to an end. But the resilience of the U.S. economy is throwing a wrinkle into those expectations. Stubbornly high prices are also creating upward pressure.

All eyes will be on the Fed, which faces a different situation now than it did a week ago. Many Fed watchers think the turmoil in the banking industry means the central bank will back away from a plan to raise interest rates by 0.5 percentage point, or 50 basis points.

“They had telegraphed, and the market had baked in, that they were going to go 50 basis points,” says Bill Banfield, executive vice president of capital markets for Rocket Mortgage. “The odds are leaning back toward a 25-basis point increase.”

Mortgage rates typically move in lockstep with the 10-year Treasury. The average rate on a 30-year loan usually is 1.5 to 2 percentage points above the 10-year rate. But in the turbulent times of 2022, that gap — known as the “spread” — widened to more than 2.5 percentage points.

“The spread between mortgage rates and the 10-year Treasury has been abnormally wide since early 2022,” the Mortgage Bankers Association’s Joel Kan says. “Further narrowing of that spread is expected to put downward pressure on mortgage rates in the coming months.”

The national median family income for 2022 was $90,000, according to the U.S. Department of Housing and Urban Development, and the median price of an existing home sold in January 2023, was $359,000, according to the National Association of Realtors. Based on a 20 percent down payment and a mortgage rate of 6.66 percent, the monthly payment of $1,845 amounts to 25 percent of the typical family’s monthly income. A year ago, median family income was $79,900, the median home price was $364,600 and the average mortgage rate was 3.4 percent. Buying the typical home then required just 19 percent of a family’s monthly income.


The Bankrate.com national survey of large lenders is conducted weekly. To conduct the National Average survey, Bankrate obtains rate information from the 10 largest banks and thrifts in 10 large U.S. markets. In the Bankrate.com national survey, our Market Analysis team gathers rates and/or yields on banking deposits, loans and mortgages. We’ve conducted this survey in the same manner for more than 30 years, and because it’s consistently done the way it is, it gives an accurate national apples-to-apples comparison. Our rates differ from other national surveys, in particular Freddie Mac’s weekly published rates. Each week Freddie Mac surveys lenders on the rates and points based on first-lien prime conventional conforming home purchase mortgages with a loan-to-value of 80 percent. “Lenders surveyed each week are a mix of lender types — thrifts, credit unions, commercial banks and mortgage lending companies — is roughly proportional to the level of mortgage business that each type commands nationwide,” according to Freddie Mac.