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.
Looking at today’s mortgage rates, a variety of prominent rates have moved up slightly. The averages for 30-year and 15-year fixed mortgages both increased. At the same time, average rates for 5/1 adjustable rate mortgages (ARMs) also rose.
The averages of the 30-year fixed, 15-year fixed and 5/1 MRAs are:
Mortgage Rate Forecasting: What’s Driving Changes in Mortgage Rates?
Various economic factors have caused mortgage rates to rise this year. Persistently high inflation is a big reason, Jacob Channel, senior economic analyst at LendingTree, told us. According to the Bureau of Labor and Statistics’ May inflation report, inflation recently hit 8.6%, its highest level in 40 years. The Federal Reserve raised its short-term policy rate by 50 basis points in May and 75 basis points in June, as inflation remained higher than expected.
A spike in mortgage rates preceded the Fed’s announcement after the release of the inflation report. “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. .
“We have a lot of factors like that putting upward pressure on mortgage rates,” Channel says. Financial markets are still reacting to China’s COVID lockdown and Russia’s invasion of Ukrainian territory. “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 that 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.”
Watch out for loan fees
Whenever you take out a mortgage, your decision should factor in loan closing costs. Closing costs can be anywhere from 3-6% of the loan amount, including origination fees, prepaid interest, and property taxes. It is possible to reduce your outgoings by accepting a higher interest rate in exchange for credits from the lender. You may sell your home or refinance your home in five to eight years. This strategy could therefore save you money in the short term.
Current Mortgage Refinance Rates
Refinancing has become a bit more expensive today as 30-year and 15-year fixed refinance mortgages have seen their average rates increase. If you’re considering a 10-year refinance loan, just know that average rates have also increased.
Today’s refinance rates are:
Current mortgage rates.
30-year mortgage rates
The median interest rate for a standard 30-year fixed mortgage is 5.81%, which represents an increase of 12 basis points from the previous week.
15-Year Fixed-Rate Mortgage Rates
The median rate for a 15-year fixed mortgage is 4.98%, an increase of 8 basis points from seven days ago.
The monthly payment on a 15-year fixed rate mortgage is, undeniably, a much higher monthly payment than what you would get on a 30-year mortgage offering the same interest rate. However, 15-year loans have significant advantages: you’ll save thousands of dollars in interest and pay off your loan much sooner.
5/1 ARM Mortgage Rates
A 5/1 ARM has an average rate of 4.26%, up 4 basis points from a week ago.
A variable rate mortgage 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 depending on your loan rate adjustment, your payment may increase significantly.
How We Determine Mortgage Rates
We use daily mortgage rate data from Bankrate for our mortgage rate trends. These overnight rates are based on a specific borrower profile, which only includes loans for primary residences where the borrower has a FICO score of 740+. Bankrate is part of the same parent company as NextAdvisor.
This table shows current average rates based on information provided to Bankrate by lenders nationwide:
Rates as of July 20, 2022.
Frequently Asked Questions (FAQ) About Mortgage Rates:
How to get the lowest mortgage rate?
There are two key components to getting the lowest mortgage rate: the loan-to-value ratio (LTV) and your credit score.
Having a credit score of 750 or higher will help you get the best rate. However, even a score of 700 or higher can get you a noticeable rate reduction compared to a lower credit score. For a credit score above 800, the reduction in the mortgage rate will not be significant.
Lenders give the biggest discounts on mortgage rates to borrowers deemed less risky. A surefire way to signal that you’re more likely to make your monthly payments is to make a larger down payment at the closing table. 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).
When should I 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.
A rate lock will only last for a certain amount of time, usually 30 to 60 days. If you’re having a problem with closing and it looks like your foreclosure rate is expiring, you should talk to your lender about it. It may offer a lock extension, however, you may need to pay a fee for this privilege.