It's still very possible to lock in a low mortgage rate, but time may be running out. No one can predict the future, but a number of converging macroeconomic trends seem to be increasing the likelihood of the Federal Reserve pushing interest rates up from the historic lows they've been at since 2020.
Fifteen-year fixed and 30-year fixed rates both climbed today, as did the average 5/1 adjustable-rate. We're not quite ready to panic, but a trajectory appears to be coming into focus. And while today's rates remain low relative to where they were several years ago, a handful of concerning trends --, and a key Fed meeting scheduled for early November -- are stirring up the market. If you're in a position to lock in a mortgage rate right now, we recommend moving forward without delay.
30-year fixed-rate mortgages
For a 30-year, fixed-rate mortgage, the average rate you'll pay is 3.18%, which is a growth of 14 basis points as 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 rate mortgage will usually have a lower monthly payment than a 15-year one -- but usually 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 2.46%, which is an increase of 16 basis points compared to a week 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, 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 ARM has an average rate of 3.20%, a climb of 15 basis points compared to a week ago. With an ARM mortgage, you'll usually get a lower interest rate than a 30-year fixed mortgage for the first five years. But you may end up paying more after that time, depending on the terms of your loan and how the rate changes with the market rate. For borrowers who plan to sell or refinance their house before the rate changes, an ARM could be a good option. But if that's not the case, you could be on the hook for a significantly higher interest rate if the market rates change.
Mortgage rate trends
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:
Average mortgage interest rates
|30-year jumbo mortgage rate||2.80%||2.79%||+0.01|
|30-year mortgage refinance rate||3.15%||3.01%||+0.14|
Rates as of Oct. 4, 2021.
How to find the best mortgage rates
When you are ready to apply for a loan, you can connect with a local mortgage broker or search online. Make sure to think about your current finances and your goals when looking for a mortgage. Things that affect what mortgage rate you might get include: your credit score, down payment, loan-to-value ratio and your debt-to-income 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 mortgage interest rate, factors including closing costs, fees, discount points and taxes might also affect the cost of your house. Be sure to shop around with multiple lenders -- such as credit unions and online lenders in addition to local and national banks -- in order to get a mortgage loan that's the right fit for you.
How does the loan term impact my mortgage?
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 stable for the life of the loan. For adjustable-rate mortgages, interest rates are fixed for a certain number of years (typically five, seven or 10 years), then the rate fluctuates annually based on the market rate.
One factor to consider when deciding 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 for people who plan on living in a home for a while. Fixed-rate mortgages offer more stability over time compared to adjustable-rate mortgages, but adjustable-rate mortgages can sometimes offer lower interest rates upfront. If you aren't planning to keep your new home for more than three to 10 years, however, an adjustable-rate mortgage could give you a better deal. There is no best loan term as a rule of thumb; it all depends on your goals and your current financial situation. Be sure to do your research and think about what's most important to you when choosing a mortgage.