After nearly two years of record-low mortgage rates, 2022 started off with rates nearly rising to levels we haven’t seen since before the pandemic.
That doesn’t mean you need to cancel your home purchase plans. Yes, rates are higher than they were in 2021, but it’s important to keep in mind 30-year fixed rates are still close to where they were a few short years ago.
Besides, there’s a lot more that goes into a homebuying decision than just an interest rate. Buying a home is about making a lifestyle choice. While the interest rate market for mortgages can shape a decision, it’s wise to not base it solely on a few basis points on a mortgage rate. What’s most important to consider is to set a realistic homebuying budget and stick to it.
Let’s take a look at current mortgage rates, where rates have been in the past, and what it all means for the borrower.
A few key mortgage rates receded today. The averages for both 30-year fixed and 15-year fixed mortgages had a downswing. The most common type of variable-rate mortgage is the 5/1 adjustable-rate mortgage (ARM) climbed.
Mortgage rates currently are:
- 30-year fixed mortgage rates are averaging 5.89%
- Today’s 20-year fixed mortgage rate is 5.82%
- The average 15-year fixed-rate mortgage currently sits at 5.10%
- 10-year mortgage rate: 5.21%
- 5/1 ARM rate: 4.26%
Mortgage Rate Trends: What’s Behind the Recent Rate Movement?
Various economic factors have led to an increase in mortgage rates this year. Persistently high inflation is a big reason, Jacob Channel, senior economic analyst at LendingTree told us. According to the Bureau of Labor and Statistics May inflation report, inflation recently reached 8.6%, its highest level in 40 years. The Federal Reserve increased its benchmark short-term rate by 50 basis points in May and by 75 basis points in June because inflation remained higher than expected.
A spike in mortgage rates preceded the Fed’s announcement after the inflation report was released. “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.
“We have a lot of factors like that that are putting upward pressure on mortgage rates,” Channel says. Financial markets are still reacting to the COVID lockdown in China and the invasion of Ukrainian territory by Russia. “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.”
Are Current Mortgage Rates Good For Buying a Home Right Now?
2022 started off with dramatic rate increases. But from a historical perspective, mortgage rates remain at comparatively normal levels.
With a combination of limited supply of homes and strong demand, home prices are up significantly from before the pandemic. The higher costs to build homes and the massive demand from buyers is also contributing to the surge. This, plus higher mortgage rates, makes the overall cost of homeownership more expensive for the borrower.
The difference of a half a point or so can equal a lot of money over a 30-year mortgage. But it’s best not to try to time the market to get the best mortgage rate. Experts say, instead, to focus on finding the right house, and make moves when your personal lifestyle and financial situation indicate it’s the right time.
Rates between mortgage lenders can vary significantly. Make sure to shop around between a few different mortgage lenders to ensure you’re getting the best current deal. “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.”
Closing Costs & Loan Fees
Anytime you take out a mortgage, be sure to pay close attention to 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.. One way to reduce your out of pocket costs, if to accept a higher interest rate in exchange for lender credits. The strategy can save you money in the short-term, so it’s worth considering if you plan to sell or refinance your home within five to eight years.
Today’s Mortgage Refinance Rates
Checking in on refinance mortgage rates, today the mean rate for a 30-year fixed refinance declined, while 15-year fixed Refinance rates saw growth. Shorter term, 10-year fixed-rate refinance mortgages moved up.
Today’s refinance rates are:
- Today’s average 30-year fixed refinance rate is: 5.88%
- 20-year fixed refinance rates are averaging 5.81%
- 15-year fixed refinance rates are averaging 5.14%
- 10-year refinance rate: 5.20%
30-Year Fixed Mortgage Interest Rates
The average 30-year fixed mortgage interest rate is 5.89%, which is a decline of 2 basis points from last week.
15-Year Fixed-Rate Mortgage Rates
The median rate for a 15-year fixed mortgage is 5.10%, which is a decrease of 1 basis point from seven days 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 sooner.
5/1 ARM Rates
A 5/1 ARM has an average rate of 4.26%, which is an addition of 24 basis points from the same time last week.
An adjustable-rate mortgage is ideal for borrowers who will refinance or sell before the rate changes. If that’s not the case, their interest rates could end up being remarkably 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 We Calculate Our Mortgage Rates
To see where mortgage rates are going, we rely on information collected by Bankrate, which is owned by the same parent company as NextAdvisor. The daily rates survey focuses on home loans where the borrower has a FICO score of 740 or more, 20% equity or more, and lives in the home.
The average rates listed below and based on the Bankrate mortgage rate survey:
|30-year jumbo mortgage rate||5.81%||5.88%||-0.07|
|30-year mortgage refinance rate||5.88%||5.89%||-0.01|
Rates as of June 23, 2022.
Mortgage Rate Frequently Asked Questions (FAQ):
How Do I Qualify for the Lowest Mortgage Rate?
Getting loan offers from two or three lenders is one of the best ways to get the lowest interest rate.
Your mortgage rate depends on a number of factors lenders consider when assessing how likely you are to repay your home loan. Your credit score is a big part of this decision. And your loan-to-value (LTV) ratio is also important, so having a larger down payment is better for your interest rate.
But banks will consider your circumstances differently. So you can provide the same documentation to three different mortgage providers, and get offers with three different mortgage rates and fees that vary just as much.
When Should I Lock in My Mortgage Rate?
Mortgage rates move up and down on a daily basis, and it’s impossible to time the market. So locking in your interest rate right now is a good idea because overall, rates are historically favorable.
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 offer an extension of the lock, however, you might have to pay a fee for that privilege.