Some principal mortgage rates crept higher today. The average 15-year fixed and 30-year fixed mortgage rates both climbed higher. At the same time, average rates for 5/1 adjustable-rate mortgages also increased.
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 average 30-year fixed mortgage interest rate is 6.43%, which is a growth of 24 basis points compared to one week ago. (A basis point is equivalent to 0.01%.) The most common loan term is a 30-year fixed mortgage. A 30-year fixed rate mortgage will usually have a smaller monthly payment than a 15-year one -- but usually a higher interest rate. 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 5.66%, which is an increase of 15 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. However, if you can afford the monthly payments, there are several benefits to a 15-year loan. 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 4.84%, a rise of 21 basis points from the same time last week. With an adjustable-rate mortgage, you'll typically get a lower interest rate than a 30-year fixed mortgage for the first five years. However, shifts in the market may cause your interest rate to increase after that time, as detailed in the terms of your loan. For borrowers who plan to sell or refinance their house before the rate changes, an adjustable-rate mortgage could be a good option. 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 increasing 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 five 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 data 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||6.42%||6.18%||+0.24|
|30-year mortgage refinance rate||6.42%||6.19%||+0.23|
Rates as of Sep. 22, 2022.
How to find the best mortgage rates
You can get a personalized mortgage rate by connecting with your local mortgage broker or using an online calculator. Make sure to take into account your current financial situation and your goals when looking for a mortgage. 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. Generally, you want a higher credit score, a larger down payment, a lower DTI and a lower LTV to get a lower interest rate. Beyond the interest rate, additional costs including closing costs, fees, discount points and taxes might also impact the cost of your house. Be sure to speak with multiple lenders -- like local and national banks, credit unions and online lenders -- and comparison shop to find the best mortgage loan for you.
What is a good loan term?
One important factor to consider when choosing a mortgage is the loan term, or payment schedule. The loan terms most commonly offered are 15 years and 30 years, although you can also find 10-, 20- and 40-year mortgages. Another important distinction is between fixed-rate and adjustable-rate mortgages. For fixed-rate mortgages, interest rates are set for the life of the loan. For adjustable-rate mortgages, interest rates are fixed for a certain number of years (usually five, seven or 10 years), then the rate changes annually based on the market interest rate.
When deciding between a fixed-rate and adjustable-rate mortgage, you should think about the length of time you plan to stay in your home. Fixed-rate mortgages might be a better fit for people who plan on staying in a home for quite some time. While adjustable-rate mortgages might offer lower interest rates upfront, fixed-rate mortgages are more stable over time. If you don't have plans to keep your new home for more than three to 10 years, though, an adjustable-rate mortgage may give you a better deal. There is no best loan term as an overarching rule; it all depends on your goals and your current financial situation. Be sure to do your research and know what's most important to you when choosing a mortgage.