Mortgage rates followed a split path today. While 15-year fixed-rate mortgages saw average rates slide down, the average interest rate for a 30-year fixed mortgage held firm. The average rate of the most common type of variable-rate mortgage, the 5/1 adjustable-rate mortgage, receded.
Mortgage rates have been rather consistently going up since the start of this year, and are expected to climb throughout 2022. Of course, interest rates are dynamic and unpredictable — at least on a daily or weekly basis — as they respond to a wide variety of economic factors. At the moment, inflation and the federal funds rate are particularly influential. The Federal Reserve has increased interest rates three times this year and has signaled its intention to hike rates again to try to contain inflation. That will likely translate into higher mortgage rates and, for prospective borrowers, steeper monthly mortgage payments. As such, homebuyers may have better luck locking in a lower mortgage interest rate sooner than later. It’s always a good idea to interview multiple lenders to compare rates and fees to find the best mortgage for your specific situation.
30-year fixed-rate mortgages
The 30-year fixed-mortgage rate average is 5.75%, which is unchanged compared to one week ago. (A basis point is equivalent to 0.01%.) The most common loan term is a 30-year fixed mortgage. A 30-year fixed mortgage will usually have a higher interest rate than a 15-year fixed rate mortgage — but also a lower monthly payment. 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 4.93%, which is a decrease of 1 basis point from seven days ago. Compared to a 30-year fixed mortgage, a 15-year fixed mortgage with the same loan value and interest rate will have a higher monthly payment. But a 15-year loan will usually be the better deal, if you’re able to afford the monthly payments. These typically include being able to get a lower interest rate, paying off your mortgage sooner, and paying less total interest in the long run.
5/1 adjustable-rate mortgages
A 5/1 ARM has an average rate of 4.23%, a decrease of 2 basis points compared to a week ago. For the first five years, you’ll usually get a lower interest rate with a 5/1 ARM compared to a 30-year fixed mortgage. But since the rate changes with the market rate, you might end up paying more after that time, as described in the terms of your loan. Because of this, an adjustable-rate mortgage might be a good option if you plan to sell or refinance your house before the rate changes. If not, changes in the market may significantly increase your interest rate.
Mortgage rate trends
Although mortgage rates were historically low at the beginning of 2022, they have been rising somewhat steadily since then. The Federal Reserve recently raised interest rates by 0.75 percentage points — the highest rate increase since 1994 — in an attempt to curb record-high inflation. As a general rule, when inflation is low, mortgage rates tend to be lower. When inflation is high, rates tend to be higher.
Although the Fed does not directly set mortgage rates, the central bank’s policy actions influence how much you pay to finance your home loan. And the Fed has signaled that it will continue to raise rates over the course of this year. So, if you’re looking to buy a house in 2022, expect mortgage rates to generally increase as the year goes on.
We use data 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||5.72%||5.73%||-0.01|
|30-year mortgage refinance rate||5.69%||5.73%||-0.04|
Rates as of July 18, 2022.
How to find the best mortgage rates
To find a personalized mortgage rate, talk to your local mortgage broker or use an online mortgage service. Make sure to think about your current finances and your goals when looking for a mortgage. Things that affect what interest rate you might get on your mortgage include: your credit score, down payment, loan-to-value ratio and your debt-to-income ratio. Generally, you want a higher credit score, a larger down payment, a lower DTI and a lower LTV to get a lower interest rate. Beyond the interest rate, factors including closing costs, fees, discount points and taxes might also factor into the cost of your house. Make sure to shop around with multiple lenders — such as credit unions and online lenders in addition to local and national banks — in order to get a loan that’s right for you.
What is the best loan term?
One important factor to consider when choosing a mortgage is the loan term or payment schedule. The most common mortgage terms are 15 years and 30 years, although 10-, 20- and 40-year mortgages also exist. Mortgages are further divided into fixed-rate and adjustable-rate mortgages. The interest rates in a fixed-rate mortgage are set for the duration of the loan. For adjustable-rate mortgages, interest rates are fixed for a certain number of years (commonly five, seven or 10 years), then the rate changes annually based on the market rate.
When choosing between a fixed-rate and adjustable-rate mortgage, you should consider how long you plan to stay in your home. If you plan on living long-term in a new house, fixed-rate mortgages may be the better option. Fixed-rate mortgages offer greater stability over time in comparison to adjustable-rate mortgages, but adjustable-rate mortgages can sometimes offer lower interest rates upfront. If you don’t have plans to keep your new house for more than three to 10 years, however, an adjustable-rate mortgage could give you a better deal. There is no best loan term as a general rule; it all depends on your goals and your current financial situation. It’s important to do your research and know what’s most important to you when choosing a mortgage.