Nearly two years have gone by with record-low mortgage rates. Now, 2022 has started off with rates rising higher than pre-pandemic levels.
Don’t cancel your home purchase plans just yet. Even though rates are higher than they were last year they are still considered “normal” from a historical perspective. It was only a few short years ago where the 30-year fixed rates were in the high 5%’s.
Homebuying decisions take a lot more consideration outside of the interest rate anyway. Buying a home is about making a lifestyle choice. What’s going on in the interest rate market can influence a decision, it’s wise to not base it solely on a few basis points on a mortgage rate. Setting and sticking to a realistic homebuying budget is way more important than what rate you get.
Let’s take a look at current mortgage rates, where rates have been in the past, and what it all means for the borrower.
Looking at today’s mortgage rates the most preeminent rates inched upward. The averages for both 30-year fixed and 15-year fixed mortgages both climbed higher. The most common type of variable-rate mortgage is the 5/1 adjustable-rate mortgage (ARM) also trended upward.
The average mortgage rates are as follows:
- The average 30-year fixed-rate mortgage currently sits at 6.55%
- The average 20-year fixed-rate mortgage currently sits at 6.56%
- 15-year fixed mortgage rates are averaging 5.73%
- 10-year mortgage rate: 5.91%
- 5/1 ARM rate: 4.87%
Mortgage Rate Trends: Why Are Mortgage Rates Changing So Fast?
The surge in mortgage rates so far this year is due to a variety of economic factors. Persistently high inflation is a big one, Jacob Channel, senior economic analyst at LendingTree told us. July’s inflation report shows 8.5%inflation year-over-year. That’s lower than June’s 9.1%, a sign that inflation is starting to cool.
Though still high, in response, the Federal Reserve increased its benchmark short-term interest rate to combat that inflation. The Fed raised rates by 50 basis points in May, 75 points in June, and by 75 basis points in July.
Recently, we saw mortgage rates surge after the inflation report and 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.
Energy prices are half responsible for these increases, Dawit Kebede, senior economist for the Credit Union National Association, said in a statement. “There are signs that some of the main drivers of inflation are easing, such as lower oil and other commodity prices in July, slower wage growth, and declining supply chain pressures. However, service price increases led by housing and pent-up demand for vehicles will keep inflation elevated in the coming months.”
Is It a Good Time to Buy a Home With Rates Where They Are?
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.”
Pay Attention to Loan Fees
If you take out a home loan, you’ll want to be aware of the closing costs. There are typically 3 to 6% of the loan amount in closing costs, including origination charges, prepaid interest, and property taxes.. Choosing a higher interest rate in exchange for lender credit can reduce your upfront costs. 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
Refinancing became a bit more expensive today as 30-year fixed and 15-year fixed refinance mortgages saw their mean rates trend upward. If you’ve been considering a 10-year refinance loan, just know average rates also moved up.
Take a look at today’s refinance rates:
- 30-year fixed refinance rates are averaging: 6.55%
- 20-year fixed refinance rates are averaging 6.57%
- 15-year fixed-rate refinance: 5.75%
- 10-year fixed refinance rate: 5.92%
30-Year Fixed-Rate Mortgage Rates
The median interest rate for a standard, 30-year, fixed mortgage is 6.55%, which is a growth of 27 basis points from the previous week.
15-Year Mortgage Rates
The median rate for a 15-year fixed mortgage is 5.73%, which is an increase of 17 basis points compared to a week ago.
A 15-year, fixed-rate mortgage’s monthly payment is larger than what you would pay with a 30-year mortgage. 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 ARM Rates
A 5/1 ARM has an average rate of 4.87%, which is an uptick of 20 basis points compared to last week.
An ARM is ideal for households who will refinance or sell before the rate changes. If that’s not the case, their interest rates could end up being noticeably 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 Determine Mortgage Rates
NextAdvisor’s mortgage interest rate averages are pulled from Bankrate’s daily rate data.. These overnight rates are based on a specific borrower profile, which only includes loans for owner occupied homes with 20% equity or more. 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||6.55%||6.28%||+0.27|
|15-year fixed rate||5.73%||5.56%||+0.17|
|30-year jumbo mortgage rate||6.55%||6.27%||+0.28|
|30-year mortgage refinance rate||6.55%||6.28%||+0.27|
Updated on September 23, 2022.
Mortgage Rate Frequently Asked Questions (FAQ):
How Do I Qualify for the Lowest Mortgage Rate?
Comparing mortgage offers is one of the best ways to qualify for the lowest rate.
The mortgage rate you’ll qualify for depends on a variety of factors lenders consider when assessing how risky it is to loan you money for a home purchase. Your credit score factors into the decision. And your loan-to-value (LTV) ratio is also important, so having a more substantial down payment is better for your interest rate.
But lenders will look at your situation differently. So you can provide the same documentation to three different lenders, and receive mortgage offers with vastly different rates and fees.
Is It a Good Idea to Lock in My Mortgage Rate Right Now?
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.