A few key mortgage rates fell today, part of a mostly downward trend over the past two weeks. Average interest rates for 15-year and 30-year fixed mortgages have declined. However, for variable rates, the 5/1 adjustable rate mortgage climbed higher.
Mortgage rates have been slowly rising since the start of this year and are expected to rise through 2022. Rates are now closer to 2018 levels than historic lows seen at the height of the pandemic. Interest rates are dynamic – they go up and down daily based on economic factors. In general, now is a good time for potential buyers to lock in a lower rate rather than later this year. Talking with several lenders will help you find the best rate available for your financial situation.
30 Year Fixed Rate Mortgages
The average interest rate on a standard 30-year fixed mortgage is 5.29%, down 13 basis points from a week ago. (One basis point equals 0.01%.) The most commonly used loan term is a 30-year fixed mortgage. A 30-year fixed rate mortgage will often have a higher interest rate than a 15-year fixed rate mortgage, but also a lower monthly payment. Although you’ll pay more interest over time – you’re paying off your loan over a longer period – 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 4.60%, down 15 basis points from 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. However, as long as you can afford the monthly payments, a 15-year loan has several advantages. You will generally get a lower interest rate and pay less interest in total because you are paying off your mortgage much faster.
5/1 Adjustable Rate Mortgages
A 5/1 ARM has an average rate of 3.91%, an increase of 4 basis points from a week ago. You’ll typically get a lower interest rate (compared to a 30-year fixed mortgage) with an ARM of 5/1 in the first five years of the mortgage. But changes in the market may cause your interest rate to increase after this period, as stated in the terms of your loan. For this reason, an ARM can be a good option if you plan to sell or refinance your home before the rate changes. But if not, you may have to pay a much higher interest rate if market rates change.
Mortgage Rate Trends
Although 2022 started with low mortgage rates, there has been an increase in recent months and rates will likely continue to rise throughout 2022. Mortgage rates are influenced by various economic factors. One of the main ones is government policy set by the Fed, which raised rates by half a percentage point in May 2022, the biggest increase in 22 years, in response to record inflation. This was the second rate hike by the Fed and several more are expected throughout the year. So if you’re looking to buy a home in 2022, expect mortgage rates to keep rising.
We use information collected by Bankrate, which is owned by the same parent company as CNET, to track these daily rates. This table summarizes the average rates offered by lenders in the United States:
Today’s Mortgage Interest Rates
Rates exact as of May 27, 2022.
How to find the best mortgage rates
When you’re ready to apply for a loan, you can contact a local mortgage broker or search online. When shopping for residential mortgage rates, consider your current goals and finances. Things that affect the mortgage rate you might get include: your credit score, your down payment, your loan-to-value ratio, and your debt-to-income ratio. Typically, you want a good credit score, higher down payment, lower DTI, and lower LTV to get a lower interest rate. The interest rate isn’t the only factor that affects the cost of your home. Also, be sure to consider other factors 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 loan that’s right for you.
How does the loan term affect my mortgage?
One important thing to consider when choosing a mortgage loan is the term of the loan or the payment schedule. The most commonly offered loan terms are 15 and 30 years, although you can also find 10, 20 and 40 year mortgages. Mortgages are further divided into fixed rate and variable rate mortgages. Interest rates on a fixed rate mortgage are fixed for the term of the loan. For adjustable rate mortgages, the interest rates are fixed for a number of years (usually five, seven or 10 years), then the rate fluctuates annually depending on the market rate.
When choosing between a fixed rate mortgage and an adjustable rate mortgage, you need to think about how long you plan to live in your home. Fixed rate mortgages may be more suitable for those who plan to live in a home for a while. Fixed rate mortgages offer more stability over time compared to adjustable rate mortgages, but adjustable rate mortgages may offer lower interest rates upfront. However, you might get a better deal with an adjustable rate mortgage if you only plan to keep your home for a few years. There is no best loan term as a general rule; it all depends on your goals and your current financial situation. Make sure you do your research and know what’s most important to you when choosing a mortgage.