After nearly two years of record high mortgage rates, 2022 has started with rates nearing levels we haven’t seen since before the pandemic.
This 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 keep in mind that 30-year fixed rates are still close to where they were a few years ago.
Plus, a home buying decision isn’t just about an interest rate. Buying a house is making a lifestyle choice. While the mortgage interest rate market can shape a decision, it’s wise not to base it on just a few basis points of a mortgage rate. 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, where rates have been in the past, and what it all means for the borrower.
A variety of key mortgage rates fell today. The averages for 30-year and 15-year fixed mortgages declined. For variable rates, the 5/1 Variable Rate Mortgage (ARM) has trended higher.
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?
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.”
What do today’s mortgage rates mean for your home buying plans?
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
Whenever you take out a home loan, be sure to pay close attention to closing costs. These fees include loan origination fees, prepaid interest and property taxes, and can range from 3-6% of the loan amount. Accepting a higher interest rate, in exchange for credits from the lender, can help you reduce your outgoings. costs. This strategy can save you money in the short term, so it’s worth considering if there’s a chance you’ll sell the home or refinance in five to eight years.
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 saw a decline.
The average refinancing rates are as follows:
Check out the mortgage rates that meet your specific needs.
30-Year Fixed-Rate Mortgage Rates
The average 30-year fixed mortgage rate is 5.81%, down 13 basis points from last week.
15-year fixed mortgage rates
The median rate for a 15-year fixed mortgage is 5.05%, down 14 basis points from a week ago.
The monthly payment on a 15-year fixed rate mortgage is, without a doubt, a much higher monthly payment than you would get on a 30-year mortgage with 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 faster.
5/1 ARM interest rate
A 5/1 ARM has an average rate of 4.29%, up 20 basis points from the same time last week.
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 We Determine 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 mortgages where the borrower has a credit score of 740+, a loan-to-value ratio (LTV) of 80% or greater, and lives in the home.
Current average rates shown below and based on the Bankrate Mortgage Rate Survey:
Updated June 24, 2022.
Frequently Asked Questions (FAQ) About Mortgage Rates:
How to get the best mortgage rate?
Comparing mortgage offers is a great way to get the lowest interest rate.
The mortgage rate you’ll qualify for depends on a variety of factors that lenders take into account when assessing the likelihood that you’ll be able to pay your monthly payments over the long term. Your credit score is a big part of that decision. And even the value of the property versus the size of your mortgage matters. So putting more money into your down payment can lower your interest rate.
But lenders will look at your situation differently. So you can provide the same documentation to three different mortgage providers and get quotes with three different mortgage rates and fees that vary equally.
Is it a good time to lock in my mortgage rate?
Mortgage rates go up and down daily, and it’s impossible to time the market. So it makes sense to lock in your interest rate now, because overall rates are historically favorable.
When you lock in your rate, ask your lender how long the lock will last. A rate lock can be good for 30-60 days, which will usually give you plenty of time to close before the lock expires. If something happens and you need to extend your rate lock, ask about fees, as many lenders charge a fee to extend a rate lock.