A number of mortgage rates soared today. There was a big increase in the interest rate for fixed-rate 30-year mortgages and 15-year fixed rates. The average rate of the most common type of variable-rate mortgage, the 5/1 adjustable-rate mortgage, also cruised higher.
Mortgage rates have been consistently going up since the start of this year, and are expected to keep climbing throughout 2022. In general, interest rates are dynamic -- they rise and fall on a daily basis depending on economic factors, including inflation and the federal funds rate, which the Federal Reserve has already increased three times this year. Because the Fed plans to keep hiking interest rates in order to contain inflation, prospective homebuyers will likely be able to lock in a lower rate now rather than later this year. Interviewing multiple lenders to compare rates and fees will help you find the best option for your financial situation.
Keep in mind that home prices come down not only to interest rates but a variety of factors. While we can't predict in the long term how the Fed's policies will impact the housing market, higher rates means that homebuyers will in the short term be dealing with steeper monthly payments.
30-year fixed-rate mortgages
The average interest rate for a standard 30-year fixed mortgage is 5.94%, which is an increase of 36 basis points as seven days ago. (A basis point is equivalent to 0.01%.) The most frequently used loan term is a 30-year fixed mortgage. A 30-year fixed mortgage will typically have a higher interest rate than a 15-year fixed rate mortgage -- but also a lower monthly payment. Although you'll pay more interest over time -- you're paying off your loan over a longer timeframe -- if you're looking for a lower monthly payment, a 30-year fixed mortgage may be a good option.
15-year fixed-rate mortgages
The average rate for a 15-year, fixed mortgage is 5.19%, which is an increase of 46 basis points from seven days ago. You'll definitely have a larger monthly payment with a 15-year fixed mortgage compared to a 30-year fixed mortgage, even if the interest rate and loan amount are the same. But a 15-year loan will usually be the better deal, if you're able to afford the monthly payments. These include usually being able to get a lower interest rate, paying off your mortgage sooner, and paying less total interest in the long run.
5/1 adjustable-rate mortgages
A 5/1 ARM has an average rate of 4.09%, a climb of 15 basis points compared to last week. You'll usually get a lower interest rate (compared to a 30-year fixed mortgage) with a 5/1 adjustable-rate mortgage in the first five years of the mortgage. But you may end up paying more after that time, depending on the terms of your loan and how the rate adjusts with the market rate. Because of this, an ARM might be a good option if you plan to sell or refinance your house before the rate changes. Otherwise, shifts in the market means your interest rate could be much higher once the rate adjusts.
Mortgage rate trends
While 2022 kicked off with low mortgage rates, rates have been increasing over recent months, shattering the historic lows from the start of the pandemic. Rates are rising in response to record-high inflation and recent action by the Federal Reserve, which raised interest rates 0.75 percentage points this month -- the highest rate increase since 1994. As a general rule, when inflation is low, mortgage rates tend to be lower -- when inflation is high, rates tend to be higher.
Though the Fed does not directly set mortgage rates, the central bank's policy moves do influence how much you'll end up paying for your home loan.The Fed has signaled it will continue to raise rates over the course of this year, so if you're looking to buy a house in 2022, expect mortgage rates to keep trending up.
We use rates collected by Bankrate, which is owned by the same parent company as CNET, to track daily mortgage rate trends. This table summarizes the average rates offered by lenders across the US:
Current average mortgage interest rates
|Loan type||Interest rate||A week ago||Change|
|30-year fixed rate||5.94%||5.58%||+0.36|
|15-year fixed rate||5.19%||4.73%||+0.46|
|30-year jumbo mortgage rate||5.89%||5.57%||+0.32|
|30-year mortgage refinance rate||5.94%||5.58%||+0.36|
Updated on June 17, 2022.
How to shop for the best mortgage rate
When you are ready to apply for a loan, you can reach out to a local mortgage broker or search online. When looking into home mortgage rates, consider your goals and current financial situation. Things that affect what the interest rate you might get on your mortgage include: your credit score, down payment, loan-to-value ratio and your debt-to-income ratio. Having a higher credit score, a higher down payment, a low DTI, a low LTV, or any combination of those factors can help you get a lower interest rate. Aside from the mortgage interest rate, additional costs including closing costs, fees, discount points and taxes might also affect the cost of your home. Be sure to shop around with multiple lenders -- including credit unions and online lenders in addition to local and national banks -- in order to get a loan that's right for you.
How does the loan term impact my mortgage?
When picking a mortgage, remember to consider the loan term, or payment schedule. The most common mortgage terms are 15 years and 30 years, although 10-, 20- and 40-year mortgages also exist. Mortgages are further divided into fixed-rate and adjustable-rate mortgages. The interest rates in a fixed-rate mortgage are fixed for the duration of the loan. For adjustable-rate mortgages, interest rates are stable for a certain number of years (typically five, seven or 10 years), then the rate fluctuates annually based on the market rate.
One thing to think about when deciding between a fixed-rate and adjustable-rate mortgage is how long you plan on staying in your house. If you plan on staying long-term in a new house, fixed-rate mortgages may be the better option. While adjustable-rate mortgages might have lower interest rates upfront, fixed-rate mortgages are more stable over time. If you aren't planning to keep your new home for more than three to 10 years, however, an adjustable-rate mortgage may give you a better deal. The best loan term is entirely dependent on your own situation and goals, so be sure to think about what's important to you when choosing a mortgage.