Some important mortgage rates crept higher today. The average 15-year fixed and 30-year fixed mortgage rates both saw growth. The average rate of the most common type of variable-rate mortgage, the 5/1 adjustable-rate mortgage, also notched higher.
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 30-year fixed-mortgage rate average is 5.88%, which is an increase of 22 basis points as seven days ago. (A basis point is equivalent to 0.01%.) The most common loan term is a 30-year fixed mortgage. A 30-year fixed mortgage will typically have a higher 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 5.08%, which is an increase of 17 basis points from the same time last week. You’ll 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 better deal, as long as you’re able to afford the monthly payments. 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 adjustable-rate mortgage has an average rate of 4.34%, an uptick of 5 basis points compared to last week. For the first five years, you’ll usually get a lower interest rate with a 5/1 adjustable-rate mortgage compared to a 30-year fixed mortgage. However, shifts in the market could cause your interest rate to increase after that time, as detailed 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. Otherwise, changes in the market means your interest rate could be much higher once the rate adjusts.
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 rates 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:
Current average mortgage interest rates
||A week ago
|30-year fixed rate
|15-year fixed rate
|30-year jumbo mortgage rate
|30-year mortgage refinance rate
Updated on Aug. 26, 2022.
How to shop for the best mortgage rate
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. 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 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 other factors such as fees, closing costs, taxes and discount points. Make sure you talk to multiple lenders — such as local and national banks, credit unions and online lenders — and comparison shop to find the best mortgage loan for you.
How does the loan term impact my mortgage?
One important consideration when choosing a mortgage is the loan term, or payment schedule. The most common mortgage terms are 15 years and 30 years, although 10-, 20- and 40-year mortgages also exist. Mortgages are further divided into fixed-rate and adjustable-rate mortgages. The interest rates in a fixed-rate mortgage are the same for the duration of the loan. Unlike a fixed-rate mortgage, the interest rates for an adjustable-rate mortgage are only the same for a certain amount of time (most frequently five, seven or 10 years). After that, the rate fluctuates annually based on the current interest rate in the market.
One factor to think about when choosing between a fixed-rate and adjustable-rate mortgage is how long you plan on staying in your home. Fixed-rate mortgages might be a better fit for people who plan on staying in a home for quite some time. Fixed-rate mortgages offer more stability over time in comparison to adjustable-rate mortgages, but adjustable-rate mortgages may offer lower interest rates upfront. If you don’t plan to keep your new house 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 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.