Almost two years have passed with record mortgage rates. Now 2022 has started with rates up from pre-pandemic levels.
Don’t cancel your home buying plans just yet. Even though the rates are higher than they were in 2021, they are still considered “normal” from a historical perspective. Only a few years ago, 30-year fixed rates were in the top 5%.
Either way, home buying decisions take a lot more into consideration besides the interest rate. Buying a house is making a lifestyle choice. What happens in the interest rate market can influence a decision, it is wise not to base it on just a few basis points of a mortgage rate. Setting and sticking to a realistic home buying budget is far more important than the 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.
What we see today is that a handful of major mortgage rates have come down. 30-year and 15-year fixed mortgage rates have declined. We also saw an increase in the average 5/1 Adjustable Rate Mortgage (ARM) rate.
The averages of the 30-year fixed, 15-year fixed and 5/1 MRAs are:
Mortgage Rate Trends: Why Are Mortgage Rates Changing So Quickly?
The surge in mortgage rates so far this year is attributable to a variety of economic factors. High and persistent inflation matters, Jacob Channel, senior economic analyst at LendingTree, told us. The May Inflation Report shows inflation at 8.6% and the highest in 40 years. In response, the Federal Reserve raised its benchmark short-term interest rate to combat this inflation. The Fed raised rates by 50 basis points in May and 75 basis points in June as inflation remained higher than expected.
Recently, we have seen mortgage rates skyrocket after the inflation report and before 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. .
Financial markets are still reacting to other global factors that may affect the economy, namely China’s COVID lockdown and Russia’s invasion of Ukraine. “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.”
Current Mortgage Rates: Are They Good for Buying a Home Right Now?
Despite the dramatic increases, mortgage rates remain at relatively normal levels and are still considered historically favorable mortgage rates.
House prices are also on the rise, and as rates rise, this will also contribute to the rising cost of ownership. Prices have risen significantly from pre-pandemic levels, with a combination of limited supply of homes, higher construction costs and massive buyer demand driving the spike.
It’s also important to remember that while mortgage rates are significant and a difference of a point or two can mean a lot of money on a 30-year mortgage, experts advise against trying to time the market to get the best mortgage rate. Focus on finding the right home, and do it when your personal lifestyle and financial situation indicate it’s the right time.
Be sure to get quotes from different lenders to ensure you get the best deal, experts say. “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
If you take out a mortgage, be sure to pay close attention to closing costs. There is usually 3-6% of the loan amount in closing costs, including origination fees, prepaid interest, and property taxes. Choosing a higher interest rate in exchange for credit from the lender can lower your upfront costs. You can save money in the short term by using this strategy, so don’t overlook it if you plan to sell your home or refinance in five to eight years.
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. If you’re considering a 10-year refinance loan, just know that average rates have also come down.
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-Rate Mortgage Rates
The average 30-year fixed mortgage interest rate is 5.83%, down 6 basis points from last week.
15-year fixed mortgage interest rate
The median rate for a 15-year fixed mortgage is 5.06%, down 4 basis points from the same time last week.
The monthly payment on a 15-year fixed rate mortgage is higher than what you would pay on a 30-year mortgage. But 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 addition of 3 basis points from last week.
An ARM is ideal for borrowers 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 Determine 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 higher, a loan-to-value (LTV) ratio of 80% or better, and the home is owner-occupied.
Average rates given below and based on the Bankrate Mortgage Rate Survey:
Rates as of June 30, 2022.
Frequently Asked Questions (FAQ) About Mortgage Rates:
How to benefit from the lowest mortgage rate?
Your credit score and loan-to-value (LTV) ratio are the most important factors in determining your interest rate.
Having a credit score above 750 will help you get the lowest rate. But, even a score over 700 can get you an attractive rate reduction compared to a lower credit score. For a credit score above 800, the mortgage rate reduction is negligible.
Lenders are offering the biggest mortgage rate cuts to homebuyers who are considered less risky. A large down payment is a sign to lenders that you have more upper hand in the game and are less likely to stop making payments. 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 time to lock in my mortgage rate?
It is impossible to know which direction mortgage rates will go from one day to the next. That’s why a mortgage rate lock is such a useful tool, because it protects you if rates go up. And since interest rates are relatively low right now, you should lock in your rate as soon as possible.
When you lock in your rate, ask your lender how long the lock will last. A rate lock can be valid for 30 to 60 days, which usually gives you plenty of time to close before the lock expires. If you want to extend the rate lock, find out about fees, as many lenders charge a fee to extend a rate lock.