A number of mortgage rates surged today to the highest they’ve been since early 2020, including 15-year fixed and 30-year fixed mortgage rates. We also saw a significant rise in the average rate of 5/1 adjustable-rate mortgages. Mortgage rates have been quite low over the last period, making it a good time for prospective homebuyers to lock in a fixed rate. But rates are dynamic and are projected to continue to rise. Before you buy a house, remember to consider your personal needs and financial situation, and speak with multiple lenders to find the best one for you.
30-year fixed-rate mortgages
For a 30-year, fixed-rate mortgage, the average rate you’ll pay is 3.77%, which is an increase of 4 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 mortgage will usually have a greater interest rate than a 15-year fixed rate mortgage — but also a lower monthly payment. You won’t be able to pay off your house as quickly and you’ll pay more interest over time, but a 30-year fixed mortgage is a good option if you’re looking to minimize your monthly payment.
15-year fixed-rate mortgages
The average rate for a 15-year, fixed mortgage is 3.15%, which is an increase of 6 basis points from the same time last week. Compared to a 30-year fixed mortgage, a 15-year fixed mortgage with the same loan value and interest rate will have a larger monthly payment. However, as long as you’re able to afford the monthly payments, there are several benefits to a 15-year loan. You’ll usually 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 adjustable-rate mortgage has an average rate of 3.75%, a climb of 2 basis points compared to a week ago. 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. But shifts in the market could cause your interest rate to increase after that time, as detailed in the terms of your loan. For borrowers who plan to sell or refinance their house before the rate changes, an adjustable-rate mortgage might be a good option. But if that’s not the case, you may be on the hook for a significantly higher interest rate if the market rates shift.
Mortgage rate trends
While 2022 kicked off with low mortgage rates, they have seen an uptick recently. There are two major factors at play here: increasing inflation rates and a growing economy. That said, rates can always rise and fall for a variety of reasons. The spread of omicron, for instance, kept rates relatively low throughout December and the start of the new year. Overall, rates are expected to go up in 2022, particularly with the Federal Reserve’s decision to reduce its bond purchases and increase interest rates.
We use information collected by Bankrate, which is owned by the same parent company as CNET, to track rates changes over time. This table summarizes the average rates offered by lenders across the country:
Average mortgage interest rates
|30-year jumbo mortgage rate
|30-year mortgage refinance rate
Rates as of Feb. 3, 2022.
How to shop for the best mortgage rate
To find a personalized mortgage rate, speak to your local mortgage broker or use an online mortgage service. Make sure to take into account your current finances and your goals when trying to find a mortgage. Things that affect what mortgage interest 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. Apart from the mortgage rate, other costs including closing costs, fees, discount points and taxes might also factor into the cost of your home. Make sure you speak with multiple lenders — including local and national banks, credit unions and online lenders — and comparison shop to find the best mortgage loan for you.
What is a good loan term?
One important thing you should consider when choosing a mortgage is the loan term, or payment schedule. The mortgage 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. 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 fixed for a certain amount of time (usually five, seven or 10 years). After that, the rate changes annually based on the market rate.
One factor to take into consideration when deciding between a fixed-rate and adjustable-rate mortgage is how long you plan on living in your house. For those who plan on living long-term in a new house, fixed-rate mortgages may be the better option. While adjustable-rate mortgages might offer lower interest rates upfront, fixed-rate mortgages are more stable over time. If you don’t have plans to keep your new house for more than three to 10 years, however, an adjustable-rate mortgage might give you a better deal. There is no best loan term as an overarching rule; it all depends on your goals and your current financial situation. It’s important to do your research and understand your own priorities when choosing a mortgage.