What the 15-year rate measures
This is the second rate in Freddie Mac's weekly Primary Mortgage Market Survey: the average interest rate on a 15-year fixed-rate mortgage. It covers the same loan as the 30-year figure in every respect but the term: a conventional, conforming, fully amortising first mortgage to buy a home, with 20% down and excellent credit. Since 17 November 2022 it has been drawn from the applications lenders submit to Freddie Mac's underwriting system rather than from a survey of lenders, as Freddie Mac explains. The 30-year tracker covers how the survey works and how to compare it with a quote; this page is about the choice between the two terms.
What the shorter term trades
Halving the term does not double the payment, but it raises it a good deal, because you repay the same principal in 180 payments instead of 360. In return, two things cut the interest you pay over the life of the loan.
- Fewer years of interest. Interest is charged on the balance you still owe. On a 15-year loan the balance falls quickly from the first payment, so there is less of it to charge interest on, year after year.
- A lower rate. Lenders and investors usually price a 15-year loan below a 30-year one, because their money is out for a shorter time and is exposed to fewer years of rate and prepayment risk.
Together these usually make the total interest on a 15-year loan less than half that on a 30-year loan of the same size. The exact figure depends on the two rates, which is why the useful number is not the 15-year rate alone but the gap between them.
The spread to the 30-year
The spread is the 30-year rate minus the 15-year rate in the same week. Freddie Mac draws both from the same sample, so the difference is a clean comparison of term and nothing else. The 15-year rate has been the lower of the two in every week to date, but the width of the gap changes with conditions in the bond market, so it is worth checking in the week you lock a rate.
The spread is also why the payment gap is narrower than the term alone would suggest. To see it in dollars, run the mortgage calculator twice on the same loan amount, once at this week's 15-year rate over 15 years and once at the 30-year rate over 30 years, and compare the monthly payment and the total interest.
Who takes a 15-year loan
The higher payment is the whole question. A lender sets the loan you can get partly by your debt-to-income ratio, and a 15-year payment uses up much more of it, so the same income qualifies for a smaller loan. The debt-to-income calculator shows how much room the larger payment leaves.
The term suits people who can carry that payment without strain: borrowers refinancing a loan they have already paid down, buyers with a large deposit or a high income relative to the price, and people who want the house paid off before a fixed date such as retirement. A common alternative is a 30-year loan with extra payments towards principal, which keeps the lower required payment as a fallback; it costs more interest than the 15-year loan, because the 30-year rate is higher, but it leaves you the choice each month. Check that your loan carries no prepayment penalty before you plan on that.
Reading the chart and the table
Each point is one week's average, dated the day Freddie Mac gives the week, usually the Thursday it was released. The series begins on 30 August 1991, twenty years after the 30-year rate, so the two lines share only the period since then. The table summarises the weeks by calendar year.
Neither rate follows the Federal Reserve step for step. Both are priced off longer-term bond yields, so set them beside the federal funds target range to see where short and long rates have gone separate ways.