A variety of fixed mortgage rates decreased today. The average interest rates for both 15-year fixed and 30-year fixed mortgages went down. But we did see another hike in the average rate of 5/1 adjustable-rate mortgages.
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.
The average interest rate for a standard 30-year fixed mortgage is 5.83%, which is a decrease of 16 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 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.
The average rate for a 15-year, fixed mortgage is 5.08%, which is a decrease of 10 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 larger monthly payment. However, as long as you can afford the monthly payments, there are several benefits to a 15-year loan. 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.
A 5/1 adjustable-rate mortgage has an average rate of 4.29%, an increase of 19 basis points from seven days ago. With an ARM mortgage, you’ll typically get a lower interest rate than a 30-year fixed mortgage for the first five years. But you might end up paying more after that time, depending on the terms of your loan and how the rate changes with the market rate. For borrowers who plan to sell or refinance their house before the rate changes, an ARM could be a good option. Otherwise, shifts in the market means your interest rate may be much higher once the rate adjusts.
Mortgage rate trends
Though mortgage rates were historically low at the beginning of 2022, they have been rising 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 data collected by Bankrate, which is owned by the same parent company as SBI, to track rate changes over time. This table summarizes the average rates offered by lenders nationwide:
Rates as of June 27, 2022.
How to shop for the best mortgage rate
You can get a personalized mortgage rate by connecting with your local mortgage broker or using an online calculator. When researching home mortgage rates, think about your goals and current financial situation. 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. Having a higher 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. Aside from the mortgage rate, other factors including closing costs, fees, discount points and taxes might also affect the cost of your home. Make sure you talk to several different lenders — such as local and national banks, credit unions and online lenders — and comparison shop to find the best loan for you.
What’s the best loan term?
One important consideration when choosing a mortgage is the loan term, or payment schedule. The loan 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 stable for the life 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 (typically five, seven or 10 years). After that, the rate fluctuates annually based on the market interest rate.
One important factor to consider when deciding between a fixed-rate and adjustable-rate mortgage is how long you plan on living in your house. Fixed-rate mortgages might be a better fit if you plan on living in a home for a while. While adjustable-rate mortgages may offer lower interest rates upfront, fixed-rate mortgages are more stable over time. However you might get a better deal with an adjustable-rate mortgage if you’re only planning to keep your house for a couple years. There is no best loan term as a general rule; it all depends on your goals and your current financial situation. Make sure to do your research and think about your own priorities when choosing a mortgage.