In 2022, mortgage rates rose nearly to levels not seen since before the pandemic, after nearly two years of record-low rates.
The refinance or purchase of your home doesn’t have to be put on hold. Although rates are higher than they were in 2021, 30-year fixed rates are still close to rates from a few years ago.
The fact is, a homebuyer’s decision involves a lot more than just an interest rate. It’s a lifestyle decision. In spite of the impact of the interest rate market on mortgages, it is not wise to base your decision solely on a few basis points. What’s most important to consider is to set a realistic homebuying budget and stick to it.
Let’s look at current mortgage rates, previous rates, and what all this means for borrowers.
A few benchmark mortgage rates sank today. The averages for both 30-year fixed and 15-year fixed mortgages fell down. At the same time, average rates for 5/1 adjustable-rate mortgages (ARM) also dropped lower.
Take a look at today’s rates:
- The average 30-year fixed-rate mortgage currently sits at 5.47%
- 20-year mortgage rate: 5.47%
- Today’s 15-year fixed mortgage rate is 4.71%
- Today’s 10-year fixed mortgage rate is 4.65%
- Today’s average 5/1 adjustable-mortgage rate is 4.16%
Mortgage Rate Trends: Why Are Mortgage Rates Changing So Fast?
Mortgage rates have increased because of a variety of economic factors so far this year. Persistently high inflation is a big one, Jacob Channel, senior economic analyst at LendingTree told us. June’s inflation report shows 9.1% inflation, the highest level in 40 years. To combat this inflation, the Federal Reserve increased its benchmark short-term interest rate. Since inflation remained higher than expected, the Fed raised rates by 50 basis points in May, by 75 basis points in June, and is expected to raise them again by 75 basis point in late July.
Following the inflation report, mortgage rates spiked ahead of the Fed’s announcement. “I think what we’re seeing is that lenders had already anticipated that the Fed was going to raise the Fed funds rate by 75 basis points and they began to preemptively push mortgage rates up,” Jacob Channel, senior economist at LendingTree, told us.
In addition to the COVID lockdown in China and Russia’s invasion of Ukrainian territory, financial markets are still reacting to other global factors. “We have a lot of factors like that that are putting upward pressure on mortgage rates,” Channel says. “The volatility has been through the roof,” Shashank Shekhar, founder and CEO of InstaMortgage, told us. “The market has been adjusting to a new news cycle practically every single day.”
What do Today’s Mortgage Rates Mean for Your Home Buying Plans?
Despite the dramatic increases, mortgage rates remain at relatively normal levels and are still considered historically favorable mortgage rates.
Home prices are also on the rise, and as rates increase, that will also contribute to the rising cost of home ownership. Prices are up significantly from before the pandemic, with a combination of limited supply of homes, higher costs to build homes and massive demand from buyers leading to the surge.
It’s also important to remember that while mortgage rates are important, and the difference of a point or so can mean a lot of money over a 30-year mortgage, experts advise against trying to time the market to get the best mortgage rate. Focus on finding the right house, and do it when your personal lifestyle and financial situation indicate it’s the right time.
Be sure to get quotes from different lenders to ensure you’re getting the best deal, experts say. “The rate highly impacts your monthly affordability for as long as you will hold this home,” Skylar Olsen, principal economist at Tomo, a digital real estate and mortgage company, told us. “It is actually a critical piece of this decision, and that takes shopping around.”
Pay Attention to Loan Fees
Anytime you take out a mortgage, you’ll want to be aware of the closing costs. These fees include loan origination fees, prepaid interest, and property taxes, and can range from 3 to 6% of the loan amount.. It is possible to reduce your out of pocket costs by accepting a higher interest rate in exchange for lender credits. You can save money in the short term by using this strategy, so don’t overlook it if you plan on selling your house or refinancing in five to eight years.
Current Mortgage Refinance Rates
There’s good news if you’ve been considering a refinance because the average rates for 15-year fixed and 30-year fixed refinance loans trailed off. If you’ve been considering a 10-year refinance loan, just know average rates also saw a decrease.
The refinance averages for 30-year, 15-year, and 10-year loans are:
- Today’s average 30-year fixed refinance rate is: 5.45%
- 20-year fixed-rate refinance: 5.45%
- 15-year fixed refinance rates are averaging 4.70%
- 10-year refinance rate: 4.67%
30-Year Fixed-Rate Mortgage Rates
The average 30-year fixed mortgage interest rate is 5.47%, which is a decline of 23 basis points from seven days ago.
15-Year Fixed-Rate Mortgage Rates
The median rate for a 15-year fixed mortgage is 4.71%, which is a decrease of 16 basis points compared to a week ago.
A 15-year, fixed-rate mortgage’s monthly payment is larger and will take up a bigger chunk of your monthly budget than a 30-year mortgage would. However, 15-year loans have some considerable benefits: You’ll save thousands of dollars in interest and pay off your loan much earlier.
5/1 Adjustable-Rate Mortgage Rates
A 5/1 ARM has an average rate of 4.16%, a fall of 3 basis points compared to a week ago.
An ARM is ideal for individuals who will refinance or sell before the rate changes. If that’s not the case, their interest rates could end up being significantly higher after a rate adjusts.
For the first five years, a 5/1 ARM will typically have a lower interest rate compared to a 30-year fixed mortgage. Keep in mind that your payment could end up being hundreds of dollars higher after a rate adjustment, depending on the terms of your loan.
How Our Mortgage Rates Are Calculated
We use Bankrate’s daily rate data for our mortgage rate trends. These overnight rates are based on a specific borrower profile, which only includes loans for primary residences where the borrower has a FICO score of 740+. Bankrate is part of the same parent company as NextAdvisor.
The current average rates listed below and based on the Bankrate mortgage rate survey:
|Loan type||Interest rate||A week ago||Change|
|30-year fixed rate||5.47%||5.70%||-0.23|
|15-year fixed rate||4.71%||4.87%||-0.16|
|30-year jumbo mortgage rate||5.45%||5.67%||-0.22|
|30-year mortgage refinance rate||5.45%||5.67%||-0.22|
Updated on August 3, 2022.
Mortgage Rate Frequently Asked Questions (FAQ):
How Do I Qualify for the Lowest Mortgage Rate?
Your credit score, and loan-to-value ratio (LTV), and are the most important factors lenders use to determine your mortgage rate.
To get the best interest rate, it’s best to have a credit score between 700 to 800. Having a credit score above 800 is nice, but will likely have a minimal impact on your rate.
Banks give the most substantial mortgage rate reductions to borrowers that are deemed less risky. A sizeable down payment is a sign to lenders that you are more committed and are less likely to default on your loan. A down payment of 20% or more will save you money in two ways: with a more favorable mortgage rate, and you’ll be able to avoid paying for private mortgage insurance (PMI).
Is Now a Good Time to Lock in My Mortgage Rate?
It’s impossible to know what direction mortgage rates will go from day to day. That’s why a mortgage rate lock is such a useful tool because it protects you if rates go up. And with interest rates being relatively low right now, you should lock in your rate as soon as you can.
A rate lock will only last for a set amount of time, typically 30-60 days. If you hit a snag during closing and it looks like your rate lock will expire you should talk with your lender. It may be able to extend the rate lock, however, you might have to pay a fee for that privilege.