A handful of important mortgage rates moved up Thursday. The average 15-year fixed and 30-year fixed mortgage rates both were higher. The average rate of the most common type of variable-rate mortgage, the 5/1 adjustable-rate mortgage, 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 toand the prospect of a US .
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 6.19%, which is an increase of 11 basis points from one week 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 rate mortgage will usually have a smaller monthly payment than a 15-year one, but typically a higher interest rate. 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 5.51%, which is an increase of 18 basis points compared to a week ago. You'll definitely have a bigger 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, as long as you can afford the monthly payments, there are several benefits to a 15-year loan. You'll most likely 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 ARM has an average rate of 4.63%, a rise of 11 basis points compared to last week. You'll typically 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 changes in the market could cause your interest rate to increase after that time, as detailed in the terms of your loan. If you plan to sell or refinance your house before the rate changes, an adjustable-rate mortgage may make sense for you. 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 data 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:
Average mortgage interest rates
|30-year jumbo mortgage rate||6.18%||6.07%||+0.11|
|30-year mortgage refinance rate||6.19%||6.09%||+0.10|
Rates as of Sept. 15, 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. In order to find the best home mortgage, you'll need to take into account your goals and overall financial situation. A range of factors -- including your down payment, credit score, loan-to-value ratio and debt-to-income ratio -- will all affect your mortgage interest rate. Generally, you want a good credit score, a higher down payment, a lower DTI and a lower LTV to 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 additional factors such as fees, closing costs, taxes and discount points. Be sure to shop around with multiple lenders -- like credit unions and online lenders in addition to local and national banks -- in order to get a loan that's the best fit for you.
How does the loan term impact my mortgage?
When picking a mortgage, remember to consider the loan term, or payment schedule. The mortgage terms most commonly offered are 15 years and 30 years, although you can also find 10-, 20- and 40-year mortgages. 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 fixed for a certain number of years (usually five, seven or 10 years), then the rate fluctuates annually based on the current interest rate in the market.
When choosing between a fixed-rate and adjustable-rate mortgage, you should consider the length of time you plan to stay in your home. Fixed-rate mortgages might be a better fit for those who plan on living in a home for quite some time. While adjustable-rate mortgages can sometimes offer lower interest rates upfront, fixed-rate mortgages are more stable over time. However, you may get a better deal with an adjustable-rate mortgage if you're only planning to keep your home for a couple years. There is no best loan term as a general rule; it all depends on your goals and your current financial situation. Be sure to do your research and know your own priorities when choosing a mortgage.