A variety of important mortgage rates moved higher today. The average interest rates for both 15-year fixed and 30-year fixed mortgages both crept higher. At the same time, average rates for 5/1 adjustable-rate mortgages also ticked up.
Mortgage rates have increased fairly consistently since the start of 2022, following in the wake of a series of interest rate hikes by the Federal Reserve. Interest rates are dynamic and unpredictable — at least on a daily or weekly basis — and they respond to a wide variety of economic factors. But the Fed’s actions, designed to mitigate the high rate of inflation, are having an unmistakable impact on mortgage rates.
If you’re looking to buy a home, trying to time the market may not play to your favor. If inflation continues to increase and rates continue to climb, it will likely translate to higher interest rates — and steeper monthly mortgage payments. As such, 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 30-year fixed mortgage interest rate is 6.61%, which is a growth of 10 basis points as seven days 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 lower monthly payment than a 15-year one — but often 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 5.97%, which is an increase of 12 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, if 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 5.49%, an increase of 8 basis points compared to last week. With an adjustable-rate mortgage, you’ll typically get a lower interest rate than a 30-year fixed mortgage for the first five years. However, since the rate adjusts with the market rate, you may end up paying more after that time, as described in the terms of your loan. If you plan to sell or refinance your house before the rate changes, an adjustable-rate mortgage might make sense for you. Otherwise, shifts in the market means your interest rate might be a good deal higher once the rate adjusts.
Mortgage rate trends
Though mortgage rates were historically low at the beginning of 2022, they have been increasing steadily since. The Federal Reserve recently raised interest rates by another 0.50 percentage points in an attempt to curb record-high inflation. The Fed has raised rates a total of seven 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, keep in mind that the Fed has signaled it will continue to raise rates into 2023, which would likely continue to drive mortgage rates upward.
We use data 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 across the US:
Today’s mortgage interest rates
Rates accurate as of Dec. 30, 2022.
How to find the best mortgage rates
To find a personalized mortgage rate, talk to your local mortgage broker or use an online mortgage service. 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 interest 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 factors such as fees, closing costs, taxes and discount points. Be sure to shop around with multiple lenders — such as credit unions and online lenders in addition to local and national banks — in order to get a loan that’s best for you.
What’s the best loan term?
When picking a mortgage, you should consider 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. For fixed-rate mortgages, interest rates are the same for the life of the loan. For adjustable-rate mortgages, interest rates are fixed for a certain number of years (typically five, seven or 10 years), then the rate changes annually based on the market interest rate.
One important factor to consider when choosing between a fixed-rate and adjustable-rate mortgage is how long you plan on staying in your house. Fixed-rate mortgages might be a better fit for people who plan on living in a home for a while. Fixed-rate mortgages offer more stability over time compared to adjustable-rate mortgages, but adjustable-rate mortgages can sometimes offer lower interest rates upfront. However, you may get a better deal with an adjustable-rate mortgage if you only plan to keep your home for a couple of years. The best loan term all depends on your situation and goals, so be sure to consider what’s important to you when choosing a mortgage.
