Some closely followed mortgage rates increased Tuesday. The average 15-year fixed and 30-year fixed mortgage rates both were higher. We also saw an uptick in the average rate of 5/1 adjustable-rate mortgages.
Though mortgage rates have been rather consistently going up since the start of this year, what happens next depends on whether inflation continues to climb or begins to retreat. Interest rates are dynamic and unpredictable -- at least on a daily or weekly basis -- and they respond to a wide variety of economic factors. Right now, they're particularly sensitive to inflation and the prospect of a US recession.
With so much uncertainty in the market, if you're looking to buy a home, trying to time the market may not play to your favor. If inflation rises and rates climb, this could translate to higher interest rates and steeper monthly mortgage payments. For this reason, you may have better luck locking in a lower mortgage interest rate sooner rather than later. No matter when you decide to shop for a home, it's always a good idea to seek out multiple lenders to compare rates and fees to find the best mortgage for your specific situation.
30-year fixed-rate mortgages
The 30-year fixed-mortgage rate average is 6.33%, which is an increase of 23 basis points from seven days ago. (A basis point is equivalent to 0.01%.) Thirty-year fixed mortgages are the most common loan term. A 30-year fixed mortgage will often 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 5.62%, which is an increase of 23 basis points from seven days ago. Compared to a 30-year fixed mortgage, a 15-year fixed mortgage with the same loan value and interest rate will have a higher monthly payment. But a 15-year loan will usually be the better deal, if 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 4.78%, an increase of 24 basis points from seven days ago. 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 changes in the market may cause your interest rate to increase after that time, as detailed in the terms of your loan. Because of this, an ARM might be a good option if you plan to sell or refinance your house before the rate changes. If not, shifts in the market could significantly increase your interest rate.
Mortgage rate trends
Though mortgage rates were historically low at the beginning of 2022, they have been climbing somewhat steadily since then. The Federal Reserve recently raised interest rates by another 0.75 percentage points in an attempt to curb record-high inflation. The Fed has raised rates a total of four times this year, but inflation still remains high. 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 actions influence how much you pay to finance your home loan. If you're looking to buy a house in 2022, keep in mind that the Fed has signaled it will continue to raise rates, and mortgage rates could increase as the year goes on. Whether rates follow their upward projection or begin to level out hinges on if inflation actually slows.
We use rates 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 across the country:
Today's mortgage interest rates
Rates accurate as of Sept. 20, 2022.
How to find the best mortgage rates
When you are ready to apply for a loan, you can reach out to a local mortgage broker or search online. When researching home mortgage rates, think about your goals and current finances. A range of factors -- including your down payment, credit score, loan-to-value ratio and debt-to-income ratio -- will all affect your mortgage rate. 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.
The interest rate isn't the only factor that affects the cost of your home. Be sure to also consider other factors such as fees, closing costs, taxes and discount points. Be sure to shop around with multiple lenders -- for example, credit unions and online lenders in addition to local and national banks -- in order to get a loan that's right for you.
What is a good loan term?
When picking a mortgage, remember to consider the loan term, or payment schedule. The most common loan 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 stable for the duration of the loan. Unlike a fixed-rate mortgage, the interest rates for an adjustable-rate mortgage are only stable for a certain amount of time (most frequently five, seven or 10 years). After that, the rate changes annually based on the current interest rate in the market.
When deciding between a fixed-rate and adjustable-rate mortgage, you should think about the length of time you plan to stay in your house. Fixed-rate mortgages might be a better fit for people who plan on staying in a home for quite some time. Fixed-rate mortgages offer more 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 have plans to keep your house for a few years. The best loan term depends on your personal situation and goals, so make sure to consider what's important to you when choosing a mortgage.