The average interest rates for both 15-year fixed and 30-year fixed mortgages both made gains today. But the 5/1 adjustable-rate mortgage declined.
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 5.72%, which is an increase of 10 basis points from one week ago. (A basis point is equivalent to 0.01%.) Thirty-year fixed mortgages are the most common loan term. 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 4.90%, which is an increase of 4 basis points from the same time last week. You’ll definitely have a bigger 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 typically get a lower interest rate, and you’ll pay less interest in total because you’re paying off your mortgage much quicker.
5/1 adjustable-rate mortgages
A 5/1 adjustable-rate mortgage has an average rate of 4.21%, a downtick of 6 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. However, since the rate shifts with the market rate, you might end up paying more after that time, as described in the terms of your loan. For borrowers who plan to sell or refinance their house before the rate changes, an ARM could be a good option. Otherwise, changes in the market means your interest rate could be significantly higher once the rate adjusts.
Mortgage rate trends
Although mortgage rates were historically low at the beginning of 2022, they have been increasing 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 rates collected by Bankrate, which is owned by the same parent company as CNET, to track changes in these daily rates. This table summarizes the average rates offered by lenders across the US:
Average mortgage interest rates
|30-year jumbo mortgage rate||5.71%||5.54%||+0.17|
|30-year mortgage refinance rate||5.70%||5.61%||+0.09|
Rates as of July 12, 2022.
How to find the best mortgage rates
When you are ready to apply for a loan, you can reach out to a local mortgage broker or search online. In order to find the best home mortgage, you’ll need to take into account your goals and current finances. Specific interest rates will vary based on factors including credit score, down payment, debt-to-income ratio and loan-to-value ratio. Having a higher credit score, a larger down payment, a low DTI, a low LTV, or any combination of those factors can help you 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 other factors such as fees, closing costs, taxes and discount points. Be sure to speak with a variety of lenders — including local and national banks, credit unions and online lenders — and comparison shop to find the best loan for you.
What is a good loan term?
One important thing to consider when choosing a mortgage is the loan term, or payment schedule. The mortgage terms most commonly offered are 15 years and 30 years, although you can also find 10-, 20- and 40-year mortgages. 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 a fixed-rate mortgage, the 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 adjusts annually based on the market rate.
One important factor to think about when deciding between a fixed-rate and adjustable-rate mortgage is how long you plan on living in your home. Fixed-rate mortgages might be a better fit for people who plan on living in a home for a while. Fixed-rate mortgages offer more stability over time compared to adjustable-rate mortgages, but adjustable-rate mortgages can sometimes offer lower interest rates upfront. If you aren’t planning to keep your new home for more than three to 10 years, though, 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 think about what’s most important to you when choosing a mortgage.