A variety of notable mortgage rates fell today. Average interest rates for 15-year and 30-year fixed mortgages have declined. The average rate of the most common type of variable rate mortgage, the 5/1 variable rate mortgage, also fell.
Mortgage rates have risen steadily since the start of the year and are expected to continue to climb throughout 2022. Of course, interest rates are dynamic and unpredictable, at least on a daily or weekly basis, as they react to a wide variety of economic factors. Currently, two of these factors – inflation and the federal funds rate – are particularly influential. The Federal Reserve has already raised interest rates three times this year and has signaled its intention to raise them again to contain inflation. This will almost certainly mean higher mortgage rates and, for potential borrowers, higher monthly mortgage payments. As such, homebuyers may have a better chance of securing a lower mortgage interest rate sooner rather than later. It’s always a good idea to interview several lenders to compare rates and fees to find the best mortgage for your particular situation.
30 Year Fixed Rate Mortgages
The average 30-year fixed mortgage interest rate is 5.74%, down 9 basis points from a week ago. (One basis point equals 0.01%.) Thirty-year fixed mortgages are the most commonly used loan term. A 30 year fixed rate mortgage will generally have a smaller monthly payment than a 15 year mortgage, but generally a higher interest rate. Although you’ll pay more interest over time – you’re paying off your loan over a longer period – 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 4.98%, down 10 basis points from a week ago. You will definitely have a higher 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 best deal, as long as you can afford the monthly payments. These typically include the ability to get a lower interest rate, pay off your mortgage sooner, and pay less total interest over the long term.
5/1 Adjustable Rate Mortgages
A 5/1 ARM has an average rate of 4.26%, down 3 basis points from the same time last week. With a variable rate mortgage, you’ll generally get a lower interest rate than a 30-year fixed mortgage for the first five years. But market fluctuations may cause your interest rate to increase after this period, as stated in the terms of your loan. For borrowers who plan to sell or refinance their home before the rate changes, an adjustable rate mortgage may be a good option. Otherwise, changes in the market mean that your interest rate could be much higher once the rate is adjusted.
Mortgage Rate Trends
Although mortgage rates were historically low at the start of 2022, they have been climbing ever since. The reason: The Federal Reserve raised interest rates 0.75 percentage points this month alone — the biggest rate hike since 1994 — in a bid to rein in record inflation. Generally, when inflation is low, mortgage rates tend to be lower. When inflation is high, rates tend to be higher.
Although the Fed does not set mortgage rates directly, central bank policy actions influence how much you pay to fund your home loan. And the Fed has signaled that it will continue to raise rates this year. So if you’re looking to buy a home in 2022, expect mortgage rates to rise as the year progresses.
We use information 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 nationwide:
Today’s Mortgage Interest Rates
Rates exact as of July 1, 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. Be sure to consider your current financial situation and 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, higher down payment, lower DTI, and 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 factor in other costs too, such as fees, closing costs, taxes and discount points. You should shop around with multiple lenders — including credit unions and online lenders in addition to local and national banks — to get a mortgage that’s right for you.
How does the loan term affect my mortgage?
When choosing a mortgage, remember to consider the length of the loan or the payment schedule. The most common mortgage terms are 15 and 30 years, although there are also 10, 20 and 40 year mortgages. Another important distinction is between fixed rate and adjustable rate mortgages. Interest rates on a fixed rate mortgage are fixed for the term of the loan. Unlike a fixed rate mortgage, an adjustable rate mortgage’s interest rates are only stable for a certain period of time (usually five, seven or 10 years). After that, the rate adjusts annually based on the market interest rate.
An important factor to consider when choosing between a fixed rate and variable rate mortgage is how long you plan to live in your home. If you plan to stay in a new home for the long term, fixed rate mortgages may be the best option. Fixed rate mortgages offer more stability over time compared to adjustable rate mortgages, but adjustable rate mortgages can sometimes offer lower interest rates upfront. However, you might get a better deal with an adjustable rate mortgage if you only plan to keep your home for a few years. There is no best loan term as a general rule; it all depends on your goals and your current financial situation. It’s important to do your research and know your own priorities when choosing a mortgage.