Mortgage rates declined across the board this week as the markets react to the sudden failures of Silicon Valley Bank and Signature Bank. The average fixed rate on a 30-year mortgage dipped from 7.16% a week ago to 7.04%. Shorter-term fixed mortgage rates and adjustable mortgage rates also retreated from a week earlier.

Here are the current mortgage rates, without discount points unless otherwise noted, as of March 16:

• 30-year fixed: 7.04% (down from 7.16% a week ago).
• 20-year fixed: 6.85% (down from 6.97% a week ago).
• 15-year fixed: 6.27% (down from 6.29% a week ago).
• 10-year fixed: 6.2% (down from 6.32% a week ago).
• 5/1 ARM: 5.78% (down from 5.8% a week ago).
• 7/1 ARM: 5.91% (down from 5.93% a week ago).
• 10/1 ARM: 6.16% (down from 6.18% a week ago).
• 30-year jumbo loans: 7.09% (down from 7.26% a week ago).
• 30-year FHA loans: 6.15% with 0.05 point (down from 6.27% a week ago).
• VA purchase loans: 6.37% with 0.05 point (down from 6.48% a week ago).

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"Mortgage rates underwent big swings this week, and fell overall, as stress on banks and heightened policy uncertainty caused investors to run to safety. Just last week, Federal Reserve Chair Jerome Powell had indicated in his remarks to Congress that the next rate hikes could be higher than what investors were anticipating. But the sudden collapse of two major banks – Silicon Valley Bank and New York’s Signature Bank – that caused a run on regional banks may have given the Fed a major reason to reconsider."

– Orphe Divounguy, senior macroeconomist at Zillow

Recent high-profile bank failures have aggravated perceptions of the economy, with economic actors apprehensive about the potential fallout. Whether real or perceived, this stress is "amplifying recession fears," Divounguy says, which could make banks tighten their lending standards, consumers reel in spending and speculators pull back on investing. This is causing longer-term yields, including mortgage rates, to decline.

All eyes are on the Federal Open Market Committee as it decides whether to continue raising rates at its meeting that begins on March 21. Alarm over the state of the U.S. financial system could potentially mean a slowdown in economic activity, which would actually lend a hand in bringing down inflation. But the newest consumer price index report shows that inflation is still more resilient than Fed policymakers would like.

"February's employment and inflation data both pointed to a still-hot, though slowly cooling, economy," says Hannah Jones, economic research analyst at Realtor.com. "All else being equal, this would likely mean a more aggressive rate hike at next week's FOMC meeting. However, in light of last week’s bank failures, the committee may choose to remain conservative to ensure stability in the economy."

Overall, most stakeholders still expect the Fed to move forward with a rate hike in March, although by a smaller 25 basis points rather than the previously anticipated 50 basis points, Reuters reports. In a lone exception, Goldman Sachs analysts say the bank no longer expects the FOMC to raise interest rates at its next meeting. Meanwhile, mortgage rates will remain volatile as the markets attempt to price in the Fed's next move.

Indicator of the Week: It Pays to Rate Shop

If you're thinking about buying a new laptop for your college student or a riding lawnmower ahead of the summer season, chances are you'll shop around at a few different stores to compare prices. You can apply the same concept to shopping for a mortgage – and the savings can be even more worthwhile.

Mortgage interest rates have been increasingly volatile over the past year, meaning that rates are changing often, and there's a wider gap between the lowest and highest rates offered in a given day. New research from Freddie Mac found that homebuyers who shop around with multiple mortgage lenders when rates are volatile can save hundreds of dollars annually and thousands of dollars over the first few years of loan repayment.

"The increase in rate dispersion means that consumers with similar borrower profiles are being offered a wide range of mortgage rates," Genaro Villa, a housing economics professional at Freddie Mac, says in the report.

When rates peaked in October and November 2022, the average mortgage rate dispersion reached about 50 basis points, or 0.5%. During that time period, borrowers who received just two rate quotes could have saved as much as $600 annually. By shopping around with at least four lenders, borrowers could potentially save $1,200 per year.

ERIKA GIOVANETTI

"Another way to look at the cost savings is from a cumulative perspective," Villa says. "Borrowers who received as many as five rate quotes during the second half of 2022 could have potentially saved more than $6,000 over the life of the loan, assuming the loan remains active for at least five years. That makes a difference."

The mortgage application process can seem daunting on its own, especially if you're considering working with three or four lenders to find the best deal. Here are some tips for mortgage rate shopping:

• Keep your rate quotes within a 45-day window. Getting preapproved to see your estimated mortgage rate requires a hard credit inquiry, which can leave a small negative mark on your credit score. But according to the newest FICO scoring models, multiple hard credit checks within a 45-day window will count as a single inquiry, lessening the impact to your credit. In some older FICO models, the window is 14 days.
• Know that rates can change from day to day. High mortgage rate volatility means that rates are changing more quickly than usual, and the current rate environment is particularly impacted by market reactions to economic data on inflation and employment. Stay in touch with your prospective lenders to see how rates are changing daily – your lending officer will let you know if rates drop significantly so you can decide whether to lock.
• Consider a lender's APR, not just the mortgage rate. The annual percentage rate is a more comprehensive view of the cost of a loan since it includes the interest rate as well as fees such as origination fees and mortgage discount points. Ask the lender to provide you with a loan estimate, which includes the loan's APR and interest rate, as well as loan fees and closing costs.
• Compare different types of mortgages. Request mortgage estimates for different loan terms, such as a 15-year mortgage versus a 30-year mortgage. You can also consider an adjustable-rate mortgage, which begins with a lower initial rate for the first few years of the loan. Also, see if you qualify for additional benefits, like a Veterans Affairs loan if you're active or retired military, or an FHA loan that's insured by the Federal Housing Administration.
• Shop around with different types of mortgage lenders. Consider getting rate quotes from traditional banks, credit unions and online lenders. A bank may offer a relationship discount if you already have a checking or savings account or another type of loan with them. And since credit unions are nonprofit and member-owned, they're typically able to offer lower rates and fees than for-profit financial institutions.

Remember: Just because rates are around 7% doesn't mean that you're stuck with that high price tag. It takes time and research to find the best mortgage for your financial situation, but it will pay off – and you'll rest easy knowing you explored all possible options.