A handful of closely followed mortgage rates jumped down again today. The big plunge in interest rate for fixed-rate 30-year mortgages is notable, and 15-year fixed rates also dropped. For variable rates, the 5/1 adjustable-rate mortgage tapered off a bit.
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 interest rate for a standard 30-year fixed mortgage is 5.27%, which is a decline of 44 basis points from one week ago. (A basis point is equivalent to 0.01%.) Thirty-year fixed mortgages are the most frequently used loan term. A 30-year fixed mortgage will usually have a greater interest rate than a 15-year fixed rate mortgage -- but also a lower monthly payment. 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 4.59%, which is a decrease of 33 basis points from seven days 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're able to afford the monthly payments, there are several benefits to a 15-year loan. These include typically being able to get a lower interest rate, paying off your mortgage sooner, and paying less total interest in the long run.
5/1 adjustable-rate mortgages
A 5/1 ARM has an average rate of 4.14%, a downtick of 5 basis points compared to a week ago. With an adjustable-rate mortgage mortgage, you'll typically get a lower interest rate than a 30-year fixed mortgage for the first five years. But since the rate adjusts with the market rate, you might end up paying more after that time, as described 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. But if that's not the case, you may be on the hook for a much higher interest rate if the market rates shift.
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 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 US:
Average mortgage interest rates
|30-year jumbo mortgage rate||5.21%||5.67%||-0.46|
|30-year mortgage refinance rate||5.27%||5.68%||-0.41|
Rates as of Aug. 2, 2022.
How to find the best mortgage rates
You can get a personalized mortgage rate by reaching out to your local mortgage broker or using an online calculator. In order to find the best home mortgage, you'll need to consider your goals and overall financial situation. Specific mortgage interest rates will vary based on factors including credit score, down payment, debt-to-income ratio and loan-to-value ratio. Having a good 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 additional factors such as fees, closing costs, taxes and discount points. Make sure you talk to several different lenders -- for example, local and national banks, credit unions and online lenders -- and comparison shop to find the best loan for you.
What is a good loan term?
One important thing 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. Mortgages are further divided into fixed-rate and adjustable-rate mortgages. The interest rates in a fixed-rate mortgage are set for the duration of the loan. For adjustable-rate mortgages, interest rates are stable for a certain number of years (commonly five, seven or 10 years), then the rate fluctuates annually based on the market rate.
When choosing between a fixed-rate and adjustable-rate mortgage, you should consider how long you plan to stay in your home. For those who plan on staying long-term in a new house, fixed-rate mortgages may be the better option. Fixed-rate mortgages offer more stability over time in comparison to adjustable-rate mortgages, but adjustable-rate mortgages can sometimes offer lower interest rates upfront. If you don't plan to keep your new home for more than three to 10 years, however, an adjustable-rate mortgage might give you a better deal. The best loan term all depends on your specific situation and goals, so make sure to consider what's important to you when choosing a mortgage.