High interest rates are sticking around as central banks around the world, including the Fed, battle stubbornly high inflation with a series of aggressive interest rate hikes. These efforts to rein in prices have also slowed global economic growth and fueled recession fears. 

Geopolitical tensions stemming from the ongoing war in Ukraine and conflict in the Middle East have further clouded the economic outlook. 

As the Fed asserts that more rate hikes are likely needed to tame inflation, analysts expect mortgage rates will continue trending upward in the near term. This could place even more affordability pressure on the housing market, especially impacting first-time homebuyers.

Getting the lowest mortgage rate possible can save you tens of thousands of dollars over the lifetime of your home loan. With rates on the rise in 2023, it's more important than ever to understand the factors impacting mortgage rates, strategically shop for the best deal, and meet lenders' requirements to qualify for the lowest rate. 

This guide will cover everything you need to know about today's mortgage rates, from how they're determined to where experts expect them to go in the months ahead.

Mortgage rates tend to follow the direction of long-term government bond yields, especially the yield on 10-year Treasury notes. Here are some of the key factors that can influence fluctuations in these yields and mortgage rates:

• Federal Reserve policy: When the Fed raises its benchmark federal funds rate, it often leads to higher borrowing costs across the economy, including mortgage rates. The Fed began aggressively hiking rates in 2022 to combat high inflation, causing mortgage rates to soar. Further Fed rate hikes are expected through 2023.
• Economic growth and inflation: Strong economic growth and rising inflation generally lead to higher mortgage rates, while slower growth and disinflation place downward pressure on rates.
• Geopolitical events: Global conflict or political turmoil often spur investors to move money into safe haven assets like Treasury bonds, lowering yields and mortgage rates. 
• Investor demand: Strong demand for mortgage-backed securities from investors leads to lower mortgage rates. When demand falls, rates tend to rise.
• Employment trends: A strong job market can fuel economic growth and push rates higher. Conversely, weak hiring data or increased unemployment tend to cause lower yields and rates.
• Housing market trends: When housing demand is high, rates tend to rise as lenders face increased demand for mortgages. But lower demand for homes often correlates with declining mortgage rates.

When shopping for a home loan, following these tips can help ensure you lock in the lowest possible mortgage rate:

• Check rates from multiple lenders: Rates vary by lender, so comparing quotes from several lenders ensures you don't overpay. Online rate comparison sites can give you a quick overview of prevailing rates.
• Improve your credit score: Work on raising your credit score to at least 740, which will qualify you for the best mortgage terms. Pay down debts, correct any errors on your credit reports, and avoid taking on new debt before applying for a mortgage.
• Lower your debt-to-income ratio: Lenders look closely at your existing debts in relation to your income. Paying down credit cards and other debts before applying for a mortgage can help lower your DTI and qualify for better rates.
• Make a sizable down payment: Down payments of 20% or more of the home's purchase price result in the best mortgage rates and eliminate the need to pay private mortgage insurance.
• Compare quotes for 15-year and 30-year terms: In general, 15-year mortgage rates are lower than those on 30-year mortgages. But the higher monthly payment on a 15-year loan may not fit your budget.
• Lock in your rate: Rates fluctuate daily. Once you find the rate you want, lock it in by completing most of the mortgage application paperwork. This protects you if rates rise further before closing.

Mortgage lenders weigh many factors when reviewing applications, but most have basic requirements borrowers must meet to qualify for certain loans. Here are typical minimum standards for popular mortgage types.

Mortgage rates have seen significant fluctuations over the past few years:

• 2020: Historic lows due to the COVID-19 pandemic. The average 30-year fixed rate mortgage fell below 3% by the end of 2020. 
• 2021: Rates remained very low early in 2021, then began to rise in the spring. By December 2021, rates returned to pre-pandemic levels around 3.5%.
• 2022: The Fed's rate hikes and inflation drove mortgage rates dramatically higher throughout 2022. Rates soared above 7% in late 2022 from around 3% at the beginning of the year.
• 2023: Rates are projected to remain elevated in 2023 compared to the past decade. Further Fed rate hikes could push averages above 8%.

The chart below shows average rates for the 30-year and 15-year fixed rate mortgages over the past three years.

The takeaway is that mortgage rates shift constantly in response to economic or political factors. Staying informed and timing your purchase to lock in a lower rate can make a huge difference in how much home you can afford. Casting a wide net when shopping for lenders pretty much guarantees you'll secure the most competitive rate on your loan.