Mortgage Rates Drop to 7.81% in 2023's Largest Single-Day Decline

Mortgage Rate Update - October 2, 2023

Following a surge to a 23-year peak just a day earlier, 30-year fixed mortgage rates experienced a significant drop on Friday, falling nearly 0.3 percentage points. This marks the most substantial single-day decline since March 2023, with average rates across most loan types decreasing by double-digit basis points.

The current average rate for a 30-year fixed mortgage stands at 7.81%. Since rates vary significantly among lenders, borrowers are encouraged to shop around and compare offers regularly to secure the best mortgage deal available.

Current Mortgage Rate Averages for New Purchases

On Friday, 30-year new purchase mortgage rates dropped sharply by 29 basis points, retreating from the brief climb above 8% to 7.81%. This dramatic dip is the largest daily decrease since March 10 and the most pronounced across all loan categories.

Other notable declines include the FHA 30-year average, down by 23 basis points, and the 20-year average, which fell by 27 basis points.

Important Note

Freddie Mac's latest weekly report showed 30-year mortgage rates hitting a 23-year high at 7.31%, slightly above August’s record of 7.23%. Their averages differ from daily rates reported here because they use a weekly average incorporating five previous days and may include loans with discount points, whereas our data reflects daily rates for zero-point loans only.

Rates for 15-year mortgages also declined by 11 basis points to 7.22%, after reaching a high of 7.33%—the highest since 2001. Jumbo 30-year rates fell 12 basis points to 7.15%, with the recent peak of 7.27% being the highest in at least two decades.

Adjustable-rate mortgages (ARMs) saw smaller declines, with 5/6 ARM loans dropping 8 basis points and 7/6 ARM loans dipping 4 basis points.

Refinancing Mortgage Rate Trends

Refinancing rates mostly mirrored the downward trend, with the 30-year refinance average falling 29 basis points, maintaining a 36 basis point spread compared to new purchase rates. The 15-year refinance average decreased by 9 basis points, while jumbo 30-year refinance rates dropped 12 basis points. The most significant decline was seen in 20-year refinance loans, which fell 42 basis points.

Use our Mortgage Calculator to estimate monthly payments for various loan options.

Important Considerations

The mortgage rates presented here represent averages and may not match promotional teaser rates advertised online. Such teaser rates often require upfront points or assume borrowers have exceptional credit and smaller loan amounts. Actual mortgage rates depend on individual factors like credit score and income, so your rate may be higher or lower than these averages.

Lowest Mortgage Rates by State

Mortgage rates differ by state due to factors like local credit profiles, loan types, and lender risk strategies. On Friday, Delaware and Vermont offered the lowest 30-year new purchase mortgage averages, while Arizona, Minnesota, Nevada, Georgia, Idaho, and Oregon had the highest rates.

Factors Influencing Mortgage Rate Fluctuations

Mortgage rates are shaped by a complex mix of macroeconomic and industry factors, including:

• Movements in the bond market, especially the 10-year Treasury yields
• The Federal Reserve’s monetary policies, particularly bond purchases and government-backed mortgage funding
• Competitive dynamics among lenders and across loan products

Because multiple factors often act simultaneously, pinpointing a single cause for rate changes can be challenging.

During much of 2021, mortgage rates remained relatively low, supported by the Federal Reserve's extensive bond-buying program in response to pandemic-related economic challenges. However, starting November 2021, the Fed tapered these purchases, ending them by March 2022.

Since then, the Fed has aggressively raised the federal funds rate to combat inflation, cumulatively increasing it by 5.25% over 18 months. While the fed funds rate doesn't directly set mortgage rates and can sometimes move inversely, this rapid increase has indirectly pushed mortgage rates higher.

The Fed has two remaining rate-setting meetings in 2023, scheduled for November 1 and December 13. Though outcomes remain uncertain, Fed Chair Jerome Powell has indicated another rate hike is possible at either meeting.

Methodology

The national mortgage rate averages cited are based on the lowest rates offered by over 200 leading lenders, assuming an 80% loan-to-value (LTV) ratio and a borrower with a FICO score between 700 and 760. These averages reflect realistic quotes borrowers might receive, differing from promotional teaser rates.

State-level rates represent the lowest lender-offered rates under the same assumptions.

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