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.
Various key mortgage rates fell today. The averages for 30-year and 15-year fixed mortgages fell. For variable rates, the 5/1 Variable Rate Mortgage (ARM) also fell.
The average mortgage rates are as follows:
Mortgage Rate Trends: Why Are Mortgage Rates Changing So Quickly?
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?
Even with the recent dramatic increases, mortgage rates remain at normal levels and are still considered historically favorable.
But the overall cost of home ownership is now rising with rising rates. With a combination of limited supply of homes, prices have risen significantly from pre-pandemic levels. Massive buyer demand and rising home construction costs are also contributing to the surge.
A point or two difference can mean a lot of money on a 30-year mortgage. But 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 doing it when your personal lifestyle and financial situation indicate that it’s the right time.
Mortgage lender rates can vary widely. In order to get the best deal, shop around between a few different mortgage lenders. 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
The umbrella term for what you pay to take out a mortgage is closing costs. Everything from prepaid property taxes to your appraisal fees falls into this category. 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.
Today’s 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 slowed.
Today’s refinance rates are:
Compare nationwide home loan rates from various lenders.
30-year fixed mortgage interest rate
The average 30-year fixed mortgage interest rate is 5.61%, down 22 basis points from last week.
15-year fixed mortgage rates
The median rate for a 15-year fixed mortgage is 4.87%, down 21 basis points from seven days ago.
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 huge advantages: you’ll pay thousands less in interest and pay off your loan much sooner.
5/1 ARM Mortgage Rates
A 5/1 ARM has an average rate of 4.27%, down 2 basis points from seven days ago.
A variable rate mortgage is ideal for individuals who will sell or refinance 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 our mortgage interest rates are calculated
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 mortgages where the borrower has a high credit score (740+), a net worth of 20% or more, and lives in the home.
Current average rates shown below and based on the Bankrate Mortgage Rate Survey:
Rates exact as of July 4, 2022.
Frequently Asked Questions (FAQ) About Mortgage Rates:
How to get the lowest mortgage rate?
Getting loan offers from two or three lenders is a great way to get the lowest interest rate.
The mortgage rate you get depends on a variety of factors that lenders consider when assessing the likelihood of you paying off your home loan. Your credit score is a big part of that decision. And your loan-to-value (LTV) ratio matters, so having a bigger down payment is better for your mortgage rate.
But lenders will look at your situation differently. So you can give the same documentation to three different mortgage providers and receive mortgage offers with vastly different rates and fees.
Should I 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. It may offer a lock extension, however, you may need to pay a fee for this privilege.