After almost two years of record-low mortgage rates, 2022 began with interest rates rising to almost levels not seen since the pandemic.
That doesn’t mean you have to cancel your home buying plans. Yes, rates are higher than they were in 2021, but it’s important to remember that 30-year fixed rates are still close to where they were a few years ago.
In addition, there is much more to the decision to buy a home than just the interest rate. Buying a home is all about making a lifestyle choice. While the mortgage rate market can influence a decision, it’s wise not to base it on just a few basis points of a mortgage rate. The most important thing is to set a realistic home buying budget and stick to it.
Let’s take a look at current mortgage rates, where rates have historically been, and what it all means for the borrower.
A host of major mortgage rates have collapsed today. Average values for both 30-year fixed-rate mortgages and 15-year fixed-rate mortgages declined. In adjustable rates, the 5/1 Adjustable Rate Mortgage (ARM) trended higher.
The averages for 30-year fixed, 15-year fixed, and 5/1 ARMs are:
Mortgage Rate Forecast: What’s Driving Changes in Mortgage Rates?
Mortgage rates have risen so far this year due to a variety of economic factors. Persistently high inflation is a big deal, Jacob Channel, senior economic analyst at LendingTree, told us. The May inflation report shows inflation at 8.6%, the highest level in 40 years. To combat this inflation, the Federal Reserve raised its short-term benchmark interest rate. As inflation remained higher than expected, the Fed hiked rates by 50 basis points in May and 75 basis points in June.
After the inflation report, mortgage rates rose ahead of the Fed’s announcement. “I think what we’re seeing is that lenders were already expecting the Fed to hike the fed funds rate by 75 basis points and they started raising mortgage rates preemptively,” Jacob Channel told us, Senior Economist at LendingTree.
Besides 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 this that are pushing mortgage rates up,” says Channel. “Volatility has gone through the roof,” Shashank Shekhar, founder and CEO of InstaMortgage, told us. “The market has adjusted to a new news cycle practically every day.”
What do today’s mortgage rates mean for your home buying plans?
Even with recent dramatic increases, mortgage rates remain at normal levels and are still considered historically cheap.
But the total cost of owning a home is now increasing as rates rise. With a combination of limited housing supply, prices have increased significantly from before the pandemic. Massive demand from buyers and higher house construction costs are also contributing to the rise.
A difference of about a point can mean a lot of money on a 30-year mortgage. However, experts advise against trying to time the market to get the best mortgage rate. It’s more important to focus on finding the right home and to do so when your personal lifestyle and financial situation indicate the right time.
Mortgage bank interest rates can vary significantly. To get the best deal, look between a few different mortgage lenders. Get quotes from different lenders to make sure you’re getting the best deal, experts say. “The interest rate has a big impact on your monthly affordability as long as you own this house,” Skylar Olsen, chief economist at Tomo, a digital real estate and mortgage company, told us. “It’s actually a critical part of that decision, and to do that, you have to look around.”
Closing Costs & Loan Fees
Whenever you close a home loan, be sure to consider closing costs. These fees include lending 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 borrowing from the lender can help you reduce your out-of-pocket expenses. This strategy can save you money in the short term, so it’s worth investigating the possibility of selling or refinancing the home in five to eight years.
Today’s mortgage refinancing rates
There’s good news if you’re considering refinancing, as median interest rates on 15-year and 30-year fixed rate refinance loans have fallen. Short-term 10-year fixed-rate refinance mortgages also declined.
The average refinancing rates are as follows:
Find out about mortgage rates that suit your individual needs.
30 year fixed rate mortgage rates
The 30-year fixed-rate mortgage rate stands at 5.81%, down 13 basis points from the previous week.
15 year fixed mortgage rates
The median interest rate for a 15-year fixed-rate mortgage is 5.05%, down 14 basis points from the previous week.
The monthly payment on a 15-year fixed-rate mortgage is undoubtedly a much higher monthly payment than you would get on a 30-year mortgage at the same rate. However, 15-year loans have some significant advantages: you 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%, up 20 basis points from the same time last week.
An adjustable rate mortgage is ideal for people looking to sell or refinance ahead of interest rate changes. If they don’t, their interest rates could be significantly higher after an interest rate reset.
For the first five years, a 5/1 ARM typically has a lower interest rate than a 30-year fixed-rate mortgage. Keep in mind that your rate could go higher and your payment could increase by hundreds of dollars a month.
How we calculate mortgage rates
To get an idea of where mortgage rates might be headed, we rely on information collected by Bankrate, which is owned by the same parent company as NextAdvisor. The Daily Rate Survey focuses on mortgages where the borrower has a credit rating above 740, a loan-to-value ratio (LTV) of 80% or better, and lives in their own home.
The current average rates are listed below and are based on Bankrate’s Mortgage Rate Survey:
Updated June 24, 2022.
Mortgage Rate Frequently Asked Questions (FAQ):
How can I get the best mortgage rate?
Comparing mortgage quotes is a great way to get the lowest interest rate.
The mortgage rate you qualify for depends on a variety of factors that lenders take into account when assessing the likelihood that you can afford your monthly payments over the long term. Your credit rating plays a big part in this decision. And the value of the property compared to the amount of your mortgage is also important. So if you invest more money in your down payment, you can lower your interest rate.
But lenders will look at your situation differently. This allows you to provide the same paperwork to three different mortgage lenders and receive offers with three different mortgage rates and fees that vary just as widely.
Is now a good time to fix my mortgage rate?
Mortgage rates move up and down daily and it is impossible to time the market. So it’s a good idea to freeze your interest rate now because overall interest rates are historically cheap.
If you lock your interest rate, ask your lender how long the lock will last. A rate lock can last anywhere from 30 to 60 days, which usually gives you enough time to close it before the lock expires. If something happens that requires you to extend your rate lock, ask about fees, as many lenders charge a rate lock extension fee.