A number of important mortgage rates crept upward today: 15-year fixed and 30-year fixed mortgage rates both inched upward. At the same time, average rates for 5/1 adjustable-rate mortgages also went up.
Mortgage rates have been slowly rising since the start of this year, and are expected to increase throughout 2022. Rates are now closer to 2018 levels than the historic lows seen during the height of the pandemic. Interest rates are dynamic – they rise and fall on a daily basis depending on economic factors. In general, now is a good time for prospective homebuyers to lock in a lower rate rather than later this year. Speaking with multiple lenders will help you find the best rate available for your financial situation.
30-year fixed-rate mortgages
For a 30-year, fixed-rate mortgage, the average rate you’ll pay is 5.55%, which is a growth of 20 basis points as seven days ago. (A basis point is equivalent to 0.01%.) Thirty-year fixed mortgages are the most frequently used loan term. A 30-year fixed mortgage rate will usually have a lower monthly payment than a 15-year one – but typically a higher interest rate. Although you’ll pay more interest over time – you’re paying off your loan over a longer timeframe – if you’re looking for a lower monthly payment, a 30-year fixed mortgage may be a good option.
15-year fixed-rate mortgages
The average rate for a 15-year, fixed mortgage is 4.70%, which is an increase of 8 basis points compared to a week ago. You’ll definitely have a larger monthly payment with a 15-year fixed mortgage compared to a 30-year fixed mortgage, even if the interest rate and loan amount are the same. But a 15-year loan will usually be the better deal, if you can afford the monthly payments. You’ll most likely get a lower interest rate, and you’ll pay less interest in total because you’re paying off your mortgage much faster.
5/1 adjustable-rate mortgages
A 5/1 ARM has an average rate of 3.92%, a climb of 3 basis points from the same time last week. With an adjustable-rate mortgage mortgage, you’ll typically get a lower interest rate than a 30-year fixed mortgage for the first five years. However, you may end up paying more after that time, depending on the terms of your loan and how the rate changes with the market rate. If you plan to sell or refinance your house before the rate changes, an ARM could make sense for you. But if that’s not the case, you might be on the hook for a much higher interest rate if the market rates change.
Mortgage rate trends
Although 2022 began with low mortgage rates, there has been an increase in recent months, and rates are likely to continue going up throughout 2022. Home loan rates are influenced by various economic factors. A major one is government policy set by the Fed, which raised rates by half a percentage point in May 2022, the highest increase in 22 years, in response to record-high inflation. This was the second rate increase by the Fed and several more are expected throughout the year. So, if you’re looking to buy a house in 2022, expect mortgage rates to keep increasing.
We use rates collected by Bankrate, which is owned by the same parent company as CNET, to track rate changes over time. This table summarizes the average rates offered by lenders across the country:
Average mortgage interest rates
|30-year jumbo mortgage rate||5.54%||5.33%||+0.21|
|30-year mortgage refinance rate||5.54%||5.33%||+0.21|
Rates as of June 8, 2022.
How to find personalized mortgage rates
When you are ready to apply for a loan, you can connect with a local mortgage broker or search online. When researching home mortgage rates, think about your goals and current financial situation. Things that affect what mortgage interest rate you might get include: your credit score, down payment, loan-to-value ratio and your debt-to-income ratio. Generally, you want a good credit score, a higher down payment, a lower DTI and a lower LTV to get a lower interest rate. The interest rate is not the only factor that affects the cost of your home – be sure to also consider additional factors such as fees, closing costs, taxes and discount points. You should compare shop with multiple lenders – including credit unions and online lenders in addition to local and national banks – in order to get a mortgage that’s best for you.
What is a good loan term?
When picking a mortgage, it’s important to consider the loan term, or payment schedule. The most common loan terms are 15 years and 30 years, although 10-, 20- and 40-year mortgages also exist. Another important distinction is between fixed-rate and adjustable-rate mortgages. For fixed-rate mortgages, interest rates are set for the life of the loan. Unlike fixed-rate mortgage, interest rates for an adjustable-rate mortgage are only stable for a certain amount of time (typically five, seven or 10 years). After that, the rate changes annually based on the market rate.
One important factor to think about when choosing between a fixed-rate and adjustable-rate mortgage is how long you plan on staying in your home. Fixed-rate mortgages might be a better fit for those who plan on staying in a home for quite some time. While adjustable-rate mortgages can sometimes offer lower interest rates upfront, fixed-rate mortgages are more stable in the long term. If you don’t plan to keep your new house for more than three to 10 years, however, an adjustable-rate mortgage might give you a better deal. The best loan term all depends on your situation and goals, so be sure to think about what’s important to you when choosing a mortgage.