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 variety of key mortgage rates slumped today. The averages for both 30-year fixed and 15-year fixed mortgages diminished. For variable rates, the 5/1 adjustable-rate mortgage (ARM) trended upward.
The averages for 30-year fixed, 15-year fixed, and 5/1 ARMs are:
- Today’s average 30-year fixed mortgage rate is 5.81%
- 20-year fixed mortgage rates are averaging 5.81%
- The average 15-year fixed-rate mortgage currently sits at 5.05%
- 10-year fixed mortgage rates are averaging 5.07%
- The average 5/1 adjustable mortgage currently sits at 4.29%
Mortgage Rate Forecast: What Drives Changes in Mortgage Rates?
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. May’s inflation report shows 8.6% 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 and by 75 basis points in June.
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?
Even with the recent dramatic increases, mortgage rates remain at normal levels and are still considered historically favorable.
But the overall cost of homeownership is now rising with rising rates. With a combination of limited supply of homes, prices are up significantly from before the pandemic. The massive demand from buyers and higher costs to build homes is also contributing to the surge.
The difference of a point or so can mean a lot of money over a 30-year mortgage. But experts advise against trying to time the market to get the best mortgage rate. It’s more important to focus on finding the right house, and do it when your personal lifestyle and financial situation indicate it’s the right time.
Mortgage lenders rates can vary significantly. In order to get the best deal, shop around between a few different mortgage lenders. 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.”
Closing Costs & Loan Fees
Anytime you take out a home loan, 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.. Accepting a higher interest rate, in exchange for lender credits can assist you in reducing your out-of-pocket costs. This strategy can save you money in the short-term, so it’s worth looking into if there is a chance you’ll be selling the home or refinancing in five to eight years.
Today’s Mortgage Refinance Rates
There’s good news if you’ve been considering a refinance because the mean rates for 15-year fixed and 30-year fixed refinance loans shrank. Shorter term, 10-year fixed-rate refinance mortgages also saw a decrease.
The average refinance rates are as follows:
- The average 30-year fixed-rate refinance currently sits at: 5.80%
- 20-year fixed-rate refinance: 5.74%
- 15-year refinance rate: 5.05%
- 10-year fixed-rate refinance: 5.05%
30-Year Fixed-Rate Mortgage Rates
The 30-year fixed-mortgage rate average is 5.81%, which is a decrease of 13 basis points from last week.
15-Year Fixed Mortgage Rates
The median rate for a 15-year fixed mortgage is 5.05%, which is a decrease of 14 basis points compared to a week ago.
A 15-year, fixed-rate mortgage’s monthly payment is, without a doubt, a much bigger monthly payment than what you’d get with a 30-year mortgage offering the same interest rate. However, 15-year loans have some considerable benefits: You’ll save thousands of dollars in interest and pay off your loan much faster.
5/1 ARM Interest Rates
A 5/1 ARM has an average rate of 4.29%, which is a climb of 20 basis points from the same time last week.
An adjustable-rate mortgage is ideal for individuals who will sell or refinance 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 rate could climb higher and your payment might grow by hundreds of dollars a month.
How We Determine Mortgage Rates
To get an idea of where mortgage rate may move, we rely on information collected by Bankrate, which is owned by the same parent company as NextAdvisor. The daily rates survey focuses on mortgages where the borrower has a 740+ credit score, a loan-to-value ratio (LTV) of 80% or better, and lives in the home.
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||5.81%||5.94%||-0.13|
|15-year fixed rate||5.05%||5.19%||-0.14|
|30-year jumbo mortgage rate||5.77%||5.89%||-0.12|
|30-year mortgage refinance rate||5.80%||5.94%||-0.14|
Updated on June 24, 2022.
Mortgage Rate Frequently Asked Questions (FAQ):
How Do I Get the Best Mortgage Rate?
Comparing mortgage offers is a great way to get the lowest interest rate.
The mortgage rate you’ll qualify for depends on a variety of factors lenders consider when assessing how the likelihood that you’ll be able to afford your monthly payments for the long term. Your credit score is a big part of this decision. And even the value of the property compared to the size of your mortgage is important. So putting more money into your down payment can reduce your interest rate.
But lenders will look at your situation 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.
Is Now a Good Time to 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.
When you lock in your rate, ask your lender how long the lock will last. A rate lock can be good for anywhere from 30 to 60 days, which typically will give you enough time to close before the lock expires. If something happens where you need to extend your rate lock, ask about fees as many lenders charge a fee for extending a rate lock.