After nearly two years of record high mortgage rates, 2022 has started with rates nearing levels we haven’t seen since before the pandemic.
This doesn’t mean you have to cancel your home buying plans. Yes, rates are higher than they were in 2021, but it’s important to keep in mind that 30-year fixed rates are still close to where they were a few years ago.
Plus, a home buying decision isn’t just about an interest rate. Buying a house is making a lifestyle choice. While the mortgage interest rate market can shape a decision, it’s wise not to base it on just a few basis points of a mortgage rate. The most important thing to consider is setting a realistic home buying budget and sticking to it.
Let’s take a look at current mortgage rates, where rates have been in the past, and what it all means for the borrower.
A few benchmark mortgage rates faded today. Interest rates for 30-year fixed mortgages are falling, while 15-year fixed mortgage rates have remained the same on average. The most common type of adjustable rate mortgage is the 5/1 Adjustable Rate Mortgage (ARM) which has gone down.
The averages of the 30-year fixed, 15-year fixed and 5/1 MRAs are:
Mortgage Rate Forecast: What’s Driving Mortgage Rate Changes?
The surge in mortgage rates so far this year is attributable to a variety of economic factors. High and persistent inflation matters, Jacob Channel, senior economic analyst at LendingTree, told us. The June inflation report shows inflation at 9.1% and the highest in 40 years. In response, the Federal Reserve raised its benchmark short-term interest rate to combat this inflation. The Fed raised rates by 50 basis points in May, 75 points in June and is expected to raise rates another 75 points in July.
Recently, we have seen mortgage rates skyrocket after the inflation report and before the Fed announcement. “I think what we’re seeing is that lenders had already forecasted the Fed was going to raise the fed funds rate by 75 basis points and they started pushing mortgage rates up preemptively,” we said. says Jacob Channel, senior economist at LendingTree. .
Energy prices are half responsible for the increases, Dawit Kebede, senior economist at the Credit Union National Association, said in a statement. “There are signs that some of the main drivers of inflation are easing, such as the drop in oil and other commodity prices in July, slowing wage growth and easing pressures on the chain. However, price increases for services driven by housing and pent-up demand for vehicles will keep inflation elevated over the coming months.
What do today’s mortgage rates mean for your home buying plans?
2022 started with dramatic rate increases. But historically, mortgage rates remain at relatively normal levels.
With a combination of a limited supply of housing and strong demand, house prices have increased significantly compared to before the pandemic. Higher costs to build homes and massive buyer demand are also contributing to the surge. This, coupled with higher mortgage rates, makes the overall cost of home ownership more expensive for the borrower.
The difference of about half a point can be a lot of money on a 30-year mortgage. But it’s best not to try to time the market to get the best mortgage rate. Instead, experts advise focusing on finding the right home and taking action when your personal lifestyle and financial situation indicate the time is right.
Rates between mortgage lenders can vary greatly. Be sure to shop between a few different mortgage lenders to ensure you get the best current deal. “The rate has a big impact on your monthly affordability as long as you keep that house,” Skylar Olsen, senior economist at Tomo, a digital real estate and mortgage company, told us. “It’s actually a critical part of that decision, and it requires shopping around.”
What to know about loan fees
The umbrella term for what you pay to take out a mortgage is closing costs. Appraisal fees, title insurance and any lender origination fees are all part of your closing costs. These fees vary depending on the size of your loan, but typically range from 3% to 6% of your loan balance. Your closing costs play a crucial role in determining your annual percentage rate (APR). In other words, the higher your closing costs, the higher your APR will be.
Today’s Mortgage Refinance Rates
There’s good news if you’re considering a refinance, as the average 15-year and 30-year fixed refinance loan rates have come down. Shorter-term 10-year fixed rate refinance mortgages also fell.
The average refinancing rates are as follows:
Find current mortgage rates for today.
30-Year Fixed-Rate Mortgage Rates
For a 30-year fixed rate mortgage, the average rate you’ll pay is 5.71%, down 2 basis points from seven days ago.
15-year fixed mortgage interest rate
The median rate for a 15-year fixed mortgage is 4.92%, the same rate as a week ago.
The monthly payment for a 15-year fixed rate mortgage is higher and will put more strain on your monthly budget than a 30-year mortgage. However, 15-year loans have significant advantages: you’ll save thousands of dollars in interest and pay off your loan much sooner.
5/1 Adjustable Rate Mortgage Rates
A 5/1 ARM has an average rate of 4.19%, down 2 basis points from last week.
An adjustable rate mortgage is ideal for households that will refinance or sell before the rate changes. If not, their interest rates could end up being significantly higher after a rate adjustment.
For the first five years, a 5/1 ARM will typically have a lower interest rate than a 30-year fixed mortgage. Keep in mind that your payment could end up being several hundred dollars higher after a rate adjustment, depending on the terms of your loan.
How we calculate our mortgage rates
NextAdvisor mortgage rate averages are taken from Bankrate daily rate data. These overnight rates are based on a specific borrower profile, which only includes loans for single-family homes with a loan-to-value ratio of 80% or higher. Bankrate is part of the same parent company as NextAdvisor.
Average rates given below and based on the Bankrate Mortgage Rate Survey:
Rates exact as of July 26, 2022.
Frequently Asked Questions (FAQ) About Mortgage Rates:
How to get the best mortgage rate?
There are two main factors in getting the lowest interest rate: the loan-to-value ratio (LTV) and your credit score.
To get the best mortgage rate, it’s best to have a credit score between 700 and 800. Having a credit score above 800 is nice, but probably won’t have a major impact on your rate.
Lenders are offering the biggest mortgage rate reductions to homebuyers who are deemed less risky. A surefire way to signal that you’re a less risky borrower is to have a bigger down payment. A down payment of 20% or more will save you money in two ways: with a lower mortgage rate, and you can avoid paying for private mortgage insurance (PMI).
Is it a good idea to lock in my mortgage rate now?
It is impossible to know which direction mortgage rates will go from one day to the next. That’s why a mortgage rate lock is such a useful tool, because it protects you if rates go up. And since interest rates are relatively low right now, you should lock in your rate as soon as possible.
A rate lock will only last for a certain amount of time, usually 30 to 60 days. If you have a problem with closing and it looks like your foreclosure rate is expiring, you should contact your lender. They may be able to extend the rate lock, however, you may need to pay a fee for this privilege.