A variety of notable mortgage rates saw growth Monday. The average interest rates for both 15-year fixed and 30-year fixed mortgages both grew. For variable rates, the 5/1 adjustable-rate mortgage also cruised 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 average interest rate for a standard 30-year fixed mortgage is 6.08%, which is an increase of 3 basis points compared to 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 mortgage will typically 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 5.40%, which is an increase of 17 basis points from seven days ago. 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 can 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 4.53%, an increase of 7 basis points compared to last week. You’ll typically get a lower interest rate (compared to a 30-year fixed mortgage) with a 5/1 adjustable-rate mortgage in the first five years of the mortgage. But you could end up paying more after that time, depending on the terms of your loan and how the rate adjusts with the market rate. If you plan to sell or refinance your house before the rate changes, an adjustable-rate mortgage may make sense for you. If not, changes in the market might significantly increase your interest rate.
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 data collected by Bankrate, which is owned by the same parent company as CNET, to track rate changes over time. This table summarizes the average rates offered by lenders across the US:
Today’s mortgage interest rates
Rates accurate as of Sept. 12, 2022.
How to shop for the best mortgage rate
When you’re ready to apply for a loan, you can reach out to a local mortgage broker or search online. When researching home mortgage rates, take into account your goals and current finances. Specific mortgage rates will vary based on factors including credit score, down payment, debt-to-income ratio and loan-to-value ratio. Having a good credit score, a higher down payment, a low DTI, a low LTV or any combination of those factors can help you get a lower interest rate. Beyond the mortgage rate, additional costs including closing costs, fees, discount points and taxes might also affect the cost of your house. Be sure to shop around with multiple lenders — like credit unions and online lenders, in addition to local and national banks — in order to get a mortgage that’s the best fit for you.
How does the loan term impact my mortgage?
When picking a mortgage, you should 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. Mortgages are further divided into fixed-rate and adjustable-rate mortgages. The interest rates in a fixed-rate mortgage are stable 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 fluctuates annually based on the market rate.
One factor to think about when deciding between a fixed-rate and adjustable-rate mortgage is how long you plan on living in your home. If you plan on living long-term in a new house, fixed-rate mortgages may be the better option. While adjustable-rate mortgages can sometimes offer lower interest rates upfront, fixed-rate mortgages are more stable over time. 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. The best loan term depends on an individual’s situation and goals, so be sure to consider what’s important to you when choosing a mortgage.
