In 2022, mortgage rates have nearly reached levels not seen since before the pandemic, after nearly two years of record high rates.
Refinancing or buying 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 a few years ago.
The fact is, a homebuyer’s decision involves more than just an interest rate. It’s a lifestyle decision. Despite the impact of the interest rate market on mortgages, it is not prudent to base your decision on just a few basis points. The most important thing to consider is setting a realistic home buying budget and sticking to it.
Let’s take a look at current mortgage rates, past rates, and what it all means for borrowers.
What we see today is that a number of major mortgage rates have fallen. 30-year and 15-year fixed mortgage rates have fallen. For variable rates, the 5/1 Variable Rate Mortgage (ARM) has increased.
Check out today’s rates:
Mortgage rate trends: what’s behind the recent rate movement?
Mortgage rates have increased due to various economic factors since the beginning of the year. High and persistent inflation matters, 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 benchmark short-term interest rate. As inflation remained higher than expected, the Fed raised rates by 50 basis points in May and 75 basis points in June.
Following the inflation report, mortgage rates soared ahead of the Fed announcement. “I think what we’re seeing is that lenders had already forecasted the Fed was going to raise the fed funds rate by 75 basis points and they started pushing mortgage rates up preemptively,” we said. says Jacob Channel, 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 that putting upward pressure on mortgage rates,” Channel says. “Volatility has gone through the roof,” Shashank Shekhar, Founder and CEO of InstaMortgage, told us. “The market has adapted to a new round of news virtually every day.”
Is it a good time to buy a house with prices where they are?
2022 started with dramatic rate increases. But historically, mortgage rates remain at relatively normal levels.
With a combination of a limited supply of housing and strong demand, house prices have increased significantly compared to before the pandemic. Higher costs to build homes and massive buyer demand are also contributing to the surge. This, coupled with higher mortgage rates, makes the overall cost of home ownership more expensive for the borrower.
The difference of about half a point can be a lot of money on a 30-year mortgage. But it’s best not to try to time the market to get the best mortgage rate. Instead, experts advise focusing on finding the right home and taking action when your personal lifestyle and financial situation indicate the time is right.
Rates between mortgage lenders can vary greatly. Be sure to shop between a few different mortgage lenders to ensure you get the best current deal. “The rate has a big impact on your monthly affordability as long as you keep that house,” Skylar Olsen, senior economist at Tomo, a digital real estate and mortgage company, told us. “It’s actually a critical part of that decision, and it requires shopping around.”
Closing costs and loan costs
The industry term for the upfront fee you pay when you get a home loan is closing costs. Appraisal fees, title insurance and any lender origination fees are all part of your closing costs. Some closing costs vary by loan size, but overall you can pay 3% to 6% of the total loan balance. It’s important to pay attention to the closing costs you pay because the higher your closing costs, the higher your annual percentage rate. (APR) will be.
Current Mortgage Refinance Rates
There’s good news if you’re considering a refinance, as the average 15-year and 30-year fixed refinance loan rates have come down. Shorter-term 10-year fixed rate refinance mortgages also fell.
The refinancing averages for 30-year, 15-year and 10-year loans are:
Check out the mortgage rates that meet your specific needs.
30-year fixed mortgage rates
For a 30-year fixed-rate mortgage, the average rate you’ll pay is 5.83%, down 16 basis points from seven days ago.
15-year fixed mortgage rates
The median rate for a 15-year fixed mortgage is 5.08%, down 10 basis points from the same time last week.
The monthly payment for a 15-year fixed rate mortgage will be much higher. It would therefore be easier to find room in your budget for the monthly payment of a 30-year loan. However, 15-year loans have significant advantages: you’ll save thousands of dollars in interest and pay off your loan much faster.
5/1 ARM interest rate
A 5/1 ARM has an average rate of 4.29%, an increase of 19 basis points from seven days ago.
An ARM is ideal for individuals who will refinance or sell before the rate changes. If not, their interest rates could end up being significantly higher after a rate adjustment.
For the first five years, a 5/1 ARM will typically have a lower interest rate than a 30-year fixed mortgage. Keep in mind that your rate could increase and your payment could increase by hundreds of dollars per month.
How we calculate our mortgage rates
To get an idea of how mortgage rates are changing, 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+, an LTV of 80% or less, and lives in the home.
The chart below compares today’s average rates to what they were a week ago and is based on information provided to Bankrate by lenders nationwide:
Rates as of June 27, 2022.
Frequently Asked Questions (FAQ) About Mortgage Rates:
How to benefit from the lowest mortgage rate?
There are two key factors to getting the best mortgage interest rate: loan-to-value ratio (LTV) and your credit score.
To get the lowest interest rate, it’s best to have a credit score between 700 and 800. Having a credit score above 800 is nice, but will likely have minimal impact on your rate.
Mortgage providers offer the biggest mortgage rate reductions to homebuyers who are considered less risky. A surefire way to show that you’re more likely to make your monthly payments is to have a larger down payment. A down payment of 20% or more will save you money in two ways: with a lower mortgage rate, and you can avoid paying for private mortgage insurance (PMI).
Is it a good idea to lock in my mortgage rate now?
Mortgage rates go up and down daily, and it’s impossible to time the market. It is therefore wise to lock in your interest rate now, because overall rates are historically favorable.
A rate lock will only last for a certain amount of time, usually 30 to 60 days. If you have a problem with closing and it looks like your foreclosure rate is expiring, you should contact your lender. They may be able to extend the rate lock, however, you may need to pay a fee for this privilege.