The average 30-year fixed rate mortgage (FRM) rate fell slightly to 6.42% in the week ending March 24, 2023. The average 15-year FRM rate also fell back, now at 5.68%.
Expect to see FRM rates continue to slip in the short term as the Fed knocks down excess inflation before FRM rates resume their long-term upward trend which, in 2013, introduced a half-cycle of some 30 years of rising FRM rates.
The 2020-2021 period of the Pandemic Economy saw FRM rates artificially reduced to their lowest rates ever. FRMs will not see those lows in the 2023 recession.
When the pandemic set in, the average 30-year FRM rate had risen to almost 4.0% which slowed price increases by reducing the amounts buyers were able to borrow. Today’s post-pandemic rise in the FRM to 6.42% inflicts a further reduction in buyer purchasing power — which controls property pricing. This forces buyers dependent on mortgage funds to consider a home in a lower price tier (unlikely), or simply wait out the drop in property prices.
Fundamentally, the setting of FRM rates is tied to the treasury bond market, as are capitalization (cap) 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%. The spread is far greater for cap rates.
However, on March 24, 2023, the 10-yr T-Note rate is 3.35%. Thus, the spread between the 10-year T-Note and 30-year FRM rate is a dramatic 3.07%, over twice the risk premium than the historical rate spread of 1.5%. Today’s generous spread indicates lenders continue to pad their risk premiums in anticipation of future rate increases — and foreclosures due to defaults.
The average monthly rate on adjustable rate mortgages (ARMs) continues to climb in 2023, presently averaging 6.55%. Currently, the interest rate on the ARM rate is higher than both the 15- and 30-year FRM rate. Thus, a riskier ARM is even less appealing to buyers seeking to increase their borrowing capacity beyond the amount allowed by an FRM.
ARM interest rates have exceeded FRM rates as the Fed drives up ARM rates and the bond market has allowed FRM rates to drift lower. This inversion in rates has completely eliminated the appeal of ARMs and the price support ARMs provided before the inversion.
Homebuyers who used ARM funding to extend their purchasing power in 2022 will be confronted with increased monthly payments when the initial teaser rate period ends. The payment increase is due to interest rate adjustments occurring in an environment of upward trending interest rates. Thus, any increase in ARM use adds a degree of instability to real estate markets when ARMs reset, five years forward for home financing.
Updated March 24, 2023. 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 03/24/23
2. 30-year FRM rate, monthly — Chart update 03/03/23
3. 15-year FRM rate — Chart update 03/24/23
4. 5/1 adjustable rate mortgage (ARM) rate, monthly — Chart update 03/03/23
5. 10-year Treasury note rate — Chart update 03/24/23
6. Combined FRM and 10-year Treasury note rates — Chart update 03/03/23
7. 91-day Treasury bill rate — Chart update 03/17/23
8. 3-month Treasury bill — Chart update 03/10/23
9. 6-month Treasury bill — Chart update 03/10/23
10. Treasury Securities average yield — Chart update 03/24/23
11. 12-month Treasury average — Chart update 03/10/23
12. Secured Overnight Financing Rate (SOFR) — Chart update 03/24/23
13. Applicable federal rates — Chart update 03/17/23
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| Chart update 03/24/23 | ||
Current | Month ago 02/24/23 6.50% | Year ago 03/25/22 4.42% |
Video updated: December 2022 The average 30-year FRM rate in California is provided by the St. Louis Federal Reserve Bank.
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| Chart update 03/03/23 | ||
Feb 2023 Average 6.40% | Jan 2023 Average 6.27% | Feb 2022 Average 3.76% |
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| Chart update 03/24/23 | ||
Current 03/24/23 5.68% | Month ago 02/24/23 5.76% | Year ago 03/25/22 3.63% |
The average 15-year FRM rate in California is provided by the St. Louis Federal Reserve Bank.
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| Chart update 03/03/23 | ||
Feb 2023 6.64% | Jan 2023 6.17% | Feb 2022 3.87% |
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. | ||
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| Chart update 03/24/23 | ||
Current 03/24/23 3.35% | Month ago 02/24/23 3.97% | Year ago 03/25/22 2.48% |
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. | ||
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| Chart update 03/03/23 | ||
Avg 15-Year Feb 2023 5.60% | Avg 30-Year Feb 2023 6.40% | Avg 10-Year T-Note Feb 2023 3.75% |
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.
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| Chart update 03/17/23 | ||
Current 03/16/23 4.89% | Month Ago 02/16/23 4.80% | Year Ago 02/18/22 0.46% |
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. | ||
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| Chart update 03/10/23 | ||
Feb 2023 4.65% | Jan 2023 4.54% | Feb 2022 0.33% |
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.
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| Chart update 03/10/23 | ||
Feb 2023 4.81% | Jan 2023 4.67% | Feb 2022 0.64% |
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. | ||
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| Chart update 03/24/23 | ||
Feb 2023 4.93% | Jan 2023 4.69% | Feb 2022 1.00% |
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. | ||
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| Chart update 03/10/23 | ||
Feb 2023 3.47% | Jan 2023 3.14% | Feb 2022 0.22% |
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. | ||
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| Chart update 03/24/23 | ||
03/24/23 4.80% | 02/23/22 4.55% | 03/25/22 0.27% |
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 replaced 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. | ||
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| Chart update 03/17/23 | ||
Short (3 years or less) Apr 2023 3.61% | Medium (3 to 9 years) Apr 2023 3.10% | Long (9+ years) Apr 2023 3.00% |
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.
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Excellent Set of GRAPHS 4 THE PUBLIC! 2 BAD THEY CAN’T UNDERSTAND IT UNLESS THEY HAVE A BUSINESS DEGREE LIKE ME!
Invest in property …while the rates are extremly low and our market prices in Ca.are half of the price as a home or piece of land 8-9 years ago. It may be years before we have a total recovery and the home price may not go up to where it was, butit is the best way to invest and cheaper to buy then to rent.
Where are you seeing the 1/2 prices?
How low can it go? The U.S. government–up to its ears in debt–is still able to borrow at unbelievably low rates (well under 2%) from foreign investors. That ability is currently based solely on the belief that American will always pay its debts and is a good investment risk.
How about a little glimpse of macro-economics?
Now could that perception ever change? If ever the foreign investors come to decide that America might not pay its debts, then we would see a sudden rise in interest rates that would boggle the mind, kicking off a massive inflation in consumer goods or plunging us into a deeper depression with deflation—take your pick.
The U.S. government runs on borrowed money—borrowed from foreign investors.
FACT: The massive U.S. debt as it currently stands, could NEVER be paid off. But if the dollar were devalued (as Roosevelt did in 1934) the debt might be paid off in cheaper dollars. This would be concomitant with a rise in the Chinese yuan.
Here’s the catch: This would be done on the backs of the American people, as it would likely spur massive inflation and cause a spike in interest rates.
With rates so low, and other investment vehicles so turbulent, it would make perfect sense to invest in housing for rental income at this time.
ditto
Concise information, clearly explained. Good stuff!
Still more good news”
helpful Synopsis
You guys are great and I look to you for unadulterated truth.
No fear of me straying with great articles like this.
Next time I renew u can bet its with your program.
Really appreciate your continued current info on all types of market rates, sales, home prices, etc. Very useful for those of us working this business every single day.
Thank you for all of the great info and data each month!
Hi ,
This is a very helpful analysis. Keep it up monthly for those that are serious about following ARMs.