The average 30-year fixed rate mortgage (FRM) rate sprang up to 6.70% in the week ending September 30, 2022. The average 15-year FRM rate also leapt up this week, to 5.96%.

The current upward trend in mortgage rates began in 2013, pivoting from the prior 30 years of declining interest rates to some 30 forward years of rising FRM rates, reflective of the historical rates cycle.

The 2020-2021 period of the Pandemic Economy saw FRM rates artificially drop to their lowest rates ever. FRM rates will not see those lows in the 2023 recession. Expect to see mortgage rates slip from current levels as we move into the 2023 recession and clear out excesses before resuming 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 6.70% inflicts a further reduction on buyer purchasing power — which controls property pricing. This forces buyers dependent on mortgage funds to either look into 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, not Federal Reserve 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 September 30, 2022, the 10-yr T-Note rate is 3.73%. Thus, the spread between the 10-year T-Note and 30-year FRM rate is 2.97%, a significantly steeper risk premium, 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 September 2022, averaging 4.87%. 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.

By 2023, the ARM rate will exceed FRM rates, driven by the climbing Fed benchmark rate.  Expect home sales volume to then slide further.

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 September 30, 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 09/30/22
2. 30-year FRM rate, monthly — Chart update 09/30/22
3. 15-year FRM rate — Chart update 09/30/22
4. 5/1 adjustable rate mortgage (ARM) rate, monthly — Chart update 09/30/22
5. 10-year Treasury note rate — Chart update 09/30/22
6. Combined FRM and 10-year Treasury note rates — Chart update 09/30/22
7. 91-day Treasury bill rate — Chart update 09/16/22
8. 3-month Treasury bill — Chart update 09/09/22
9. 6-month Treasury bill — Chart update 09/09/22
10. Treasury Securities average yield — Chart update 09/16/22
11. 12-month Treasury average — Chart update 09/09/22
12. London Inter-Bank Offered rate (LIBOR) — Chart update 09/16/22
13. Secured Overnight Financing Rate (SOFR) — Chart update 09/23/22
14. Applicable federal rates — Chart update 09/23/22
Chart update 09/30/22

Current
09/30/22
6.70%
Month ago
09/2/22
5.66%
Year ago
10/1/21
3.01%
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 09/30/22
Sep 2022
Average
6.11%
Aug 2022
Average
5.31%
Sep 2021
Average
2.91%
 

Chart update 09/30/22
Current
09/30/22
5.96%
Month ago
09/2/22
4.98%
Year ago
10/1/21
2.28%
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 09/30/22
Sep 2022
4.87%
Aug 2022
4.42%
Sep 2021
2.45%
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 09/30/22
Current
09/30/22
3.73%
Month ago
09/2/22
3.26%
Year ago
10/1/21
1.46%
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 09/30/22
Avg 15-Year
September 2022
5.35%
Avg 30-Year
September 2022
6.11%
Avg 10-Year T-Note
September 2022
3.50%

 

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 09/16/22
Current
09/15/22
3.14%
Month Ago
08/18/22
2.66%
Year Ago
09/16/21
0.04%
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 09/09/22
Aug 2022
2.63%
Jul 2022
2.23%
Aug 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 09/09/22
 Aug 2022
3.05%
Jul 2022
2.76%
Aug 2021
0.06%

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 09/16/22
Aug 2022
3.28%
Jul 2022
3.02%
Aug 2021
0.07%
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 09/09/22
Aug 2022
1.37%
Jul 2022
1.10%
Aug 2021
0.09%
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 09/23/22
09/22/22
2.99%
08/18/22
2.28%
09/24/21
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 09/16/22
1-Month
2.81%
6-Month
3.84%
1-Year
4.24%
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 09/23/22
Short (3 years or less)
Oct 2022
2.55%
Medium (3 to 9 years)
Oct 2022
2.46%
Long (9+ years)
Oct 2022
2.57%
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