The average 30-year fixed rate mortgage (FRM) rate floundered at 6.49% in the week ending December 2, 2022. The average 15-year FRM rate regressed further this week, to 5.76%.  

This week’s fall back in rates interrupts a long-term upward trend in mortgage rates which began in 2013, pivoting from the prior 30 years of declining interest rates to some 30 forward years of rising FRM rates. 

The 2020-2021 period of the Pandemic Economy saw FRM rates artificially dropped to their lowest rates ever. FRM rates will not see those lows in the 2023 recession. Expect to see rates slip from current levels as the Fed works to knock down excess inflation before rates resume their upward trend.

By the time the pandemic set in, the average 30-year FRM rate available to buyers had risen to almost 4.0%. This cut funding and slowed price increases. Today’s post-pandemic rise in the FRM to 6.49% inflicts a further reduction on buyer purchasing power — which controls property pricing. This forces buyers dependent on mortgage funds to consider either a riskier ARM for funding, purchase a lower-priced property, or wait until prices drop significantly.

Fundamentally, the setting of FRM rates is tied to bond market rates, as are capitalization rates. The 30-year FRM rate moves in tandem with the 10-year Treasury Note rate. Historically, the risk premium spread between the 10-yr T-Note rate and the 30-yr FRM rate is 1.5%.

However, on December 2, 2022, the 10-yr T-Note rate is 3.58%. Thus, the spread between the 10-year T-Note and 30-year FRM rate is 2.91%, a significantly steeper risk premium, just under double the historical rate spread of 1.5%. Today’s high spread indicates lenders are padding their risk premiums in anticipation of future rate increases — and foreclosures due to defaults.

The average monthly rate on adjustable rate mortgages (ARMs) climbed higher in November 2022, averaging 5.70%. Currently, interest rates on both 15- and 30-year FRM rates are significantly higher than the ARM rate. As a consequence, a riskier ARM appeals to buyers seeking to increase their borrowing capacity beyond the amount allowed by an FRM at a higher rate.

Watch for FRM interest rates to soon dip below ARMs, the result of a cautious bond market holding back FRM rates from rising faster than ARM rates as the Fed continues to fight inflation, though now at a reduced pace. Thus, an inversion in rates is likely in the first half of 2023, which will slash homebuyer appeal of ARMs instantly. 

Homebuyers using ARM funding will be confronted with increased monthly payments when the initial teaser rate period ends. The payment increase is due to the interest rate adjustment occurring in an environment of upward trending interest rates. Thus, any increase in ARM use adds a degree of instability to the housing market when ARM resets begin five years forward.

Updated December 2, 2022. Original copy released March 2012.

Click the link to go directly to a chart, or browse the charts by scrolling below.

1. 30-year fixed rate mortgage (FRM) rate, weekly — Chart update 12/2/22
2. 30-year FRM rate, monthly — Chart update 12/2/22
3. 15-year FRM rate — Chart update 12/2/22
4. 5/1 adjustable rate mortgage (ARM) rate, monthly — Chart update 12/2/22
5. 10-year Treasury note rate — Chart update 12/2/22
6. Combined FRM and 10-year Treasury note rates — Chart update 12/2/22
7. 91-day Treasury bill rate — Chart update 11/18/22
8. 3-month Treasury bill — Chart update 12/2/22
9. 6-month Treasury bill — Chart update 12/2/22
10. Treasury Securities average yield — Chart update 12/2/22
11. 12-month Treasury average — Chart update 12/2/22
12. London Inter-Bank Offered rate (LIBOR) — Chart update 11/18/22
13. Secured Overnight Financing Rate (SOFR) — Chart update 11/18/22
14. Applicable federal rates — Chart update 11/18/22
Chart update 12/2/22

Current
12/2/22
6.49%
Month ago
11/4/22
6.95%
Year ago
12/3/21
3.11%

Video updated October 2022
The average 30-year FRM rate in California is provided by the St. Louis Federal Reserve Bank.
More information:
St. Louis Federal Reserve

Chart update 11/25/22
Nov 2022
Average
6.74%
Oct 2022
Average
6.90%
Nov 2021
Average
3.07%
 

Chart update 12/2/22
Current
12/2/22
5.76%
Month ago
11/4/22
6.29%
Year ago
12/3/21
2.39%
The average 15-year FRM rate in California is provided by the St. Louis Federal Reserve Bank.
More information:
St. Louis Federal Reserve
 

Chart update 12/2/22
Nov 2022
5.70%
Oct 2022
5.71%
Nov 2021
2.36%
The 5/1 average adjustable rate mortgage (ARM) rate shows the average rate for the first five years after origination. After the initial five-year period, the ARM rate is adjusted annually based on an index figure, such as a certain Treasury Bill rate (which reflects Federal Reserve rate movements) or the London Inter-Bank Offered Rate (LIBOR). Beginning January 2016, the average ARM rate in California is provided by Bankrate.com. Prior to January 2016, the average ARM rate is provided by Freddie Mac’s survey of the Western Region of the U.S.
Chart update 12/2/22
Current
12/2/22
3.58%
Month ago
11/4/22
4.16%
Year ago
12/3/21
1.36%
This rate is a leading indicator of the direction of future Freddie Mac rates. The 10-year rate historically runs closer to 4% during a stable money market. The rate is influenced by worldwide demand for the dollar and anticipated future domestic inflation.
 
 

Chart update 12/2/22
Avg 15-Year
November 2022
6.06%
Avg 30-Year
November 2022
6.74%
Avg 10-Year T-Note
November 2022
3.82%

 

Video update: September 2022
The average 15- and 30-year conventional commitment rates are the rates at which a lender commits to lend mortgage money in the United States-West/California for the duration of the life of each respective mortgage as reported by Freddie Mac. The green line reflects the 10-Year Treasury Note Average, a leading indicator of the direction of future Freddie Mac rates. It is comprised of the level of worldwide demand for the dollar and anticipated future domestic inflation.
More information:
Freddie Mac’s Primary Mortgage Market Survey report
California Mortgage Rates by Bankrate.com 
10-year Treasury Rate from the Federal Reserve
Chart update 11/18/22
Current
11/18/22
4.25%
Month Ago
10/13/22
3.51%
Year Ago
11/18/21
0.06%
This rate determines the minimum interest rate the seller must use in a delayed §1031 transaction and report when not receiving interest on §1031 monies held by a facilitator/accommodator. This rate also sets the amount of the ordinary income the facilitator/accommodator must report.
Chart update 12/2/22
Nov 2022
4.15%
Oct 2022
3.72%
Nov 2021
0.05%
The 3-Month Treasury Bill is the rate managed by the Federal Reserve through the Fed Funds Rate as the base price of borrowing money in the short-term. It is used in determining the yield spread, which predicts the likelihood of a recession one year forward. The posted rate is the monthly average for the listed month. Rates are released with a 1-2 month reporting delay.
Related article: Using the yield spread to forecast recessions
Chart update 12/2/22
 Nov 2022
4.48%
Oct 2022
4.18%
Nov 2021
0.07%

The six-month T-Bill rate is one of several indices used by lenders to periodically adjust the adjustable rate mortgage (ARM) rate. The adjusted rate equals the indexed rate (at the time of adjustment or an average of several prior rates) plus the lender’s profit margin. The posted rate is the monthly average for the listed month. Rates are released with a 1-2 month reporting delay.
Chart update 12/2/22
Nov 2022
4.73%
Oct 2022
4.43%
Nov 2021
0.18%
This index is one of several indexes used by lenders as stated in their ARM note to periodically adjust the note’s interest rate. The ARM interest rate equals T-Bill yield, plus the lender’s profit margin. The index is an average of T-Bill yields with maturities adjusted to one year.
Chart update 12/2/22
Nov 2022
2.42%
Oct 2022
2.04%
Nov 2021
0.088%
This index is one of several indexes used by lenders as stated in their ARM note to periodically adjust the note’s interest rate. This figure is an average of the one-year T-Bill rates for the past 12 months. The ARM interest rate equals the 12-Month Treasury Average yield plus the lender’s profit margin. There is a one-two month lag in data reporting for the 12-Month Treasury Average.
Chart update 11/18/22
11/18/22
3.80%
10/21/22
3.03%
11/19/21
0.05%
This index is one of several indices used by lenders as stated in their ARM note to periodically adjust the note’s interest rate. It is taking over the LIBOR in 2021, which was found to be manipulated in the years leading up to the 2008 recession and financial crisis. The ARM interest rate equals the SOFR rate plus the lender’s profit margin. The rate is based on overnight borrowing in the U.S. Treasury repo market. The SOFR is produced in a transparent manner and is based on observable transactions, rather than models, and, unlike the LIBOR, is not dependent on bank estimates.
Chart update 11/18/22
1-Month
3.90%
6-Month
5.09%
1-Year
5.46%
This index is one of several indexes used by lenders as stated in their ARM note to periodically adjust the note’s interest rate. The ARM interest rate equals the LIBOR rate plus the lender’s profit margin. The rate is set by the banks in London, England.
Chart update 11/18/22
Short (3 years or less)
Nov 2022
3.06%
Medium (3 to 9 years)
Nov 2022
2.96%
Long (9+ years)
Nov 2022
2.93%
These rates determine minimum interest yield reportable on carryback financing. The AFR category is determined by the carryback due date. Rates are for monthly payments, reported for the coming month.
More information: Internal Revenue Service Applicable Federal Rates page