A couple of closely followed mortgage rates trended lower today. 15-year fixed and 30-year fixed mortgage rates both decreased. The average rate of the most common type of variable-rate mortgage, the 5/1 adjustable-rate mortgage, also receded.
Mortgage rates have been slowly rising since the start of this year, and are expected to increase throughout 2022. Rates are now closer to 2018 levels than the historic lows seen during the height of the pandemic. Interest rates are dynamic -- they rise and fall on a daily basis depending on economic factors. In general, now is a good time for prospective homebuyers to lock in a lower rate rather than later this year. Speaking with multiple lenders will help you find the best rate available for your financial situation.
30-year fixed-rate mortgages
For a 30-year, fixed-rate mortgage, the average rate you'll pay is 5.27%, which is a decrease of 11 basis points as seven days ago. (A basis point is equivalent to 0.01%.) The most common loan term is a 30-year fixed mortgage. A 30-year fixed mortgage will usually have a higher interest rate than a 15-year fixed rate mortgage -- but also a lower monthly payment. You won't be able to pay off your house as quickly and you'll pay more interest over time, but a 30-year fixed mortgage is a good option if you're looking to minimize your monthly payment.
15-year fixed-rate mortgages
The average rate for a 15-year, fixed mortgage is 4.57%, which is a decrease of 10 basis points from the same time last week. 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, as long as you can afford the monthly payments. You'll typically get a lower interest rate, and you'll pay less interest in total because you're paying off your mortgage much quicker.
5/1 adjustable-rate mortgages
A 5/1 adjustable-rate mortgage has an average rate of 3.90%, a fall of 2 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 ARM in the first five years of the mortgage. But since the rate shifts with the market rate, you might end up paying more after that time, as described in the terms of your loan. For borrowers who plan to sell or refinance their house before the rate changes, an ARM may be a good option. Otherwise, shifts in the market means your interest rate could be significantly higher once the rate adjusts.
Mortgage rate trends
Though 2022 began with low mortgage rates, there has been a steady rise in recent months, and rates will likely continue going up throughout 2022. Home loan rates are influenced by various economic factors. A major one is government policy set by the Fed, which raised rates by half a percentage point in May 2022, the highest increase in 22 years, in response to record-high inflation. This was the second rate increase by the Fed and several more are expected throughout the year. So, if you're looking to buy a house in 2022, expect mortgage rates to keep rising.
We use information collected by Bankrate, which is owned by the same parent company as CNET, to track changes in these daily rates. This table summarizes the average rates offered by lenders nationwide:
Average mortgage interest rates
|30-year jumbo mortgage rate||5.24%||5.33%||-0.09|
|30-year mortgage refinance rate ||5.22%||5.37%||-0.15|
Rates as of May. 31, 2022.
How to find personalized mortgage rates
To find a personalized mortgage rate, meet with your local mortgage broker or use an online mortgage service. In order to find the best home mortgage, you'll need to take into account your goals and overall financial situation. Specific interest rates will vary based on factors including credit score, down payment, debt-to-income ratio and loan-to-value ratio. Generally, you want a good credit score, a larger down payment, a lower DTI and a lower LTV to get a lower interest rate. Apart from the interest rate, other factors including closing costs, fees, discount points and taxes might also factor into the cost of your home. Make sure you talk to several different lenders -- including local and national banks, credit unions and online lenders -- and comparison shop to find the best mortgage loan for you.
What's the best loan term?
When picking a mortgage, it's important 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. Another important distinction is between fixed-rate and adjustable-rate mortgages. For fixed-rate mortgages, interest rates are fixed for the life of the loan. For adjustable-rate mortgages, interest rates are the same for a certain number of years (most frequently five, seven or 10 years), then the rate adjusts annually based on the market rate.
One thing to think about when choosing between a fixed-rate and adjustable-rate mortgage is how long you plan on living in your house. Fixed-rate mortgages might be a better fit if you plan on living in a home for quite some time. Fixed-rate mortgages offer greater stability over time in comparison to adjustable-rate mortgages, but adjustable-rate mortgages might offer lower interest rates upfront. However you might get a better deal with an adjustable-rate mortgage if you only plan to keep your house for a couple years. The best loan term is entirely dependent on an individual's situation and goals, so be sure to consider what's important to you when choosing a mortgage.