A variety of notable mortgage rates moved downward today. We saw a decline in 30-year fixed and 15-year fixed mortgage rates. Average rates for 5/1 adjustable-rate mortgages also decreased, though not as significantly.
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 average interest rate for a standard 30-year fixed mortgage is 5.28%, which is a decrease of 37 basis points from one week ago. (A basis point is equivalent to 0.01%.) The most frequently used loan term is a 30-year fixed mortgage. A 30-year fixed rate mortgage will usually have a lower monthly payment than a 15-year one — but typically 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 4.61%, which is a decrease of 26 basis points compared to a week ago. Compared to a 30-year fixed mortgage, a 15-year fixed mortgage with the same loan value and interest rate will have a higher monthly payment. 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 ARM has an average rate of 4.09%, a decrease of 11 basis points compared to last week. For the first five years, you’ll typically get a lower interest rate with a 5/1 adjustable-rate mortgage compared to a 30-year fixed mortgage. However, you might end up paying more after that time, depending on the terms of your loan and how the rate shifts with the market rate. For borrowers who plan to sell or refinance their house before the rate changes, an adjustable-rate mortgage may be a good option. Otherwise, shifts in the market means your interest rate may be significantly higher once the rate adjusts.
Mortgage rate trends
Though mortgage rates were historically low at the beginning of 2022, they have been increasing 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 information collected by Bankrate, which is owned by the same parent company as CNET, to track changes in these daily rates. This table summarizes the average rates offered by lenders across the US:
Today’s mortgage interest rates
Rates accurate as of Aug. 1, 2022.
How to find the best mortgage rates
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 take into account your goals and current finances. A range of factors — including your down payment, credit score, loan-to-value ratio and debt-to-income ratio — will all affect your mortgage interest rate. Generally, you want a higher credit score, a larger down payment, a lower DTI and a lower LTV to get a lower interest rate. Apart from the mortgage interest rate, other costs including closing costs, fees, discount points and taxes might also factor into the cost of your home. You should speak with a variety of lenders — including local and national banks, credit unions and online lenders — and comparison shop to find the best loan for you.
What is a good loan term?
One important thing to keep in mind 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. For fixed-rate mortgages, interest rates are stable for the life of the loan. For adjustable-rate mortgages, interest rates are the same for a certain number of years (commonly five, seven or 10 years), then the rate adjusts annually based on the market interest rate.
When deciding between a fixed-rate and adjustable-rate mortgage, you should take into consideration how long you plan to live in your home. Fixed-rate mortgages might be a better fit for those who plan on staying in a home for quite some time. Fixed-rate mortgages offer greater stability over time compared to adjustable-rate mortgages, but adjustable-rate mortgages can sometimes offer lower interest rates upfront. If you aren’t planning to keep your new home for more than three to 10 years, however, an adjustable-rate mortgage might give you a better deal. The best loan term is entirely dependent on your personal situation and goals, so make sure to take into consideration what’s important to you when choosing a mortgage.
