A variety of notable mortgage rates decreased today. The average interest rates for both 15-year fixed and 30-year fixed mortgages fell down. The average rate of the most common type of variable-rate mortgage, the 5/1 adjustable-rate mortgage, also dropped.
Mortgage rates have been consistently going up since the start of this year, and are expected to keep climbing throughout 2022. Of course, interest rates are dynamic and unpredictable — at least on a daily or weekly basis — as they respond to a wide variety of economic factors. At the moment, two of those factors — inflation and the federal funds rate — are particularly influential. The Federal Reserve has already increased interest rates three times this year and has signaled its intention to hike rates again to contain inflation. That will almost certainly translate into higher mortgage rates and, for prospective borrowers, steeper monthly mortgage payments. As such, homebuyers may have better luck locking in a lower mortgage interest rate sooner than later. It’s always a good idea to interview multiple lenders to compare rates and fees to find the best mortgage for your specific situation.
30-year fixed-rate mortgages
The average 30-year fixed mortgage interest rate is 5.74%, which is a decline of 9 basis points compared to 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 rate mortgage will usually have a smaller monthly payment than a 15-year one — but usually a higher interest rate. 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 4.98%, which is a decrease of 10 basis points compared to a week ago. You’ll definitely have a larger 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 usually 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 4.26%, a slide of 3 basis points from the same time last week. With an adjustable-rate mortgage mortgage, you’ll usually get a lower interest rate than a 30-year fixed mortgage for the first five years. But shifts in the market may 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 may be a good option. Otherwise, changes in the market means your interest rate might 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 steadily since then. The reason: The Federal Reserve has raised interest rates by 0.75 percentage points just this month — the highest rate increase since 1994 — in an attempt to curb record-high inflation. 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. And the Fed has signaled it will continue to raise rates over the course of this year. So, if you’re looking to buy a house in 2022, expect mortgage rates to increase as the year goes on.
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 accurate 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. Make sure to take into account your current financial situation and your goals when searching 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, 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 costs 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 — in order to get a mortgage that works best for you.
How does the loan term impact my mortgage?
When picking a mortgage, remember to consider 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. Another important distinction is between fixed-rate and adjustable-rate mortgages. The interest rates in a fixed-rate mortgage are set for the duration of the loan. Unlike a fixed-rate mortgage, the interest rates for an adjustable-rate mortgage are only stable for a certain amount of time (most frequently five, seven or 10 years). After that, the rate adjusts annually based on the market interest rate.
One important factor to think about when choosing between a fixed-rate and adjustable-rate mortgage is the length of time you plan on living in your home. If you plan on staying long-term in a new house, fixed-rate mortgages may be the better option. Fixed-rate mortgages offer greater stability over time in comparison to adjustable-rate mortgages, but adjustable-rate mortgages can sometimes offer lower interest rates upfront. However you could get a better deal with an adjustable-rate mortgage if you’re only planning to keep your home for a couple years. 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 know your own priorities when choosing a mortgage.
