A few key mortgage rates crept up today. Average mortgage rates on 15-year fixed and 30-year fixed both rose. The average rate of the most common type of variable rate mortgage, the 5/1 variable rate mortgage, also rose. While mortgage rates have risen fairly consistently since the start of this year, what comes next depends on whether inflation continues to rise or begins to decline. Interest rates are dynamic and unpredictable – at least on a daily or weekly basis – and they react to a wide variety of economic factors. At the moment, they are 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, it may not be to your advantage to time the market. If inflation rises and rates rise, it can translate into higher interest rates and higher monthly mortgage payments. For this reason, you may sooner rather than later lock in a lower mortgage interest rate. No matter when you decide to buy a home, it’s always a good idea to search multiple lenders to compare rates and fees to find the best mortgage for your specific situation.
Mortgages with a term of 30 years with fixed interest
For a 30-year fixed-rate mortgage, the average interest rate you pay is 6.08%, up 20 basis points from a week ago. (A basis point equals 0.01%.) Thirty-year fixed mortgages are the most commonly used loan term. A 30-year fixed-rate mortgage typically has a higher interest rate than a 15-year fixed-rate mortgage, but also has a lower monthly payment. You won’t be able to pay off your home as quickly and you will pay more interest over time, but a 30-year fixed mortgage is a good option if you want to minimize your monthly payment.
Mortgages with a term of 15 years with fixed interest
The average rate for a 15-year, fixed mortgage is 5.25%, up 17 basis points from the same time last week. Compared to a 30-year fixed mortgage, a 15-year fixed mortgage with the same loan value and interest will have a higher monthly payment. But as long as you can afford the monthly payments, there are several advantages to a 15-year loan. Usually you get a lower interest rate and pay less interest in total because you pay off your mortgage much faster.
5/1 floating rate mortgages
A 5/1 floating rate mortgage has an average interest rate of 4.45%, up 11 basis points from last week. For the first five years, you will typically get a lower interest rate with a 5/1 floating rate mortgage compared to a 30-year fixed mortgage. But changes in the market can cause your interest rate to rise after that time, as described in the terms of your loan. Therefore, a variable rate mortgage can be a good option if you plan to sell or refinance your home before the interest rate changes. But if not, you may be looking for a significantly higher interest rate as market rates change.
Mortgage Interest Trends
While mortgage rates were historically low in early 2022, they have risen somewhat steadily since then. The Federal Reserve recently raised interest rates by another 0.75 percentage point in an effort to curb record high inflation. The Fed has raised interest rates a total of four times this year, but inflation remains high. When inflation is low, the general rule is that mortgage interest rates are lower. When inflation is high, rates are usually higher. While the Fed doesn’t directly set mortgage rates, the central bank’s policy actions affect how much you pay to fund your home loan. If you’re looking to buy a home in 2022, keep in mind that the Fed has indicated that it will continue to raise interest rates and that mortgage rates could rise over the course of the year. Whether rates follow their upward projection or begin to level out depends on whether inflation actually slows. We use information collected by Bankrate, which is owned by the same parent company as CNET, to track price changes over time. This table summarizes the average rates offered by lenders in the US:
Average Mortgage Interest Rates
|30 years fixed||6.08%||5.88%||+0.20|
|15 years fixed||5.25%||5.08%||+0.17|
|30 year jumbo mortgage rate||6.10%||5.87%||+0.23|
|Mortgage interest over 30 years||6.05%||5.84%||+0.21|
Rates as of September 2, 2022.
How to Shop for the Best Mortgage Rate
You can get a personal mortgage rate by contacting your local mortgage broker or by using an online calculator. When researching mortgage rates, consider your goals and current financial situation. Specific mortgage rates will vary based on factors such as credit score, down payment, debt-to-income ratio, and loan-to-value ratio. In general, you want a good credit score, a larger down payment, a lower DTI and a lower LTV to get a lower interest rate. In addition to the mortgage interest, other costs such as closing costs, fees, discount points and taxes can also affect the cost of your home. You’ll need to talk to multiple lenders — such as local and state banks, credit unions, and online lenders — and a comparison shop to find the best mortgage loan for you.
How does the term of my loan affect my mortgage?
When choosing a mortgage, consider the loan term or payment schedule. The most common mortgage terms are 15-year and 30-year, although 10-, 20- and 40-year mortgages also exist. Another important distinction is between fixed and floating rate mortgages. Interest rates on a fixed-rate mortgage are stable over the life of the loan. For floating rate mortgages, the interest rate is set for a certain number of years (usually five, seven or ten years), after which the rate fluctuates annually based on the market interest rate. One factor to consider when choosing between a fixed and variable rate mortgage is the length of time you plan to stay in your home. If you plan to live in a new home for a long time, a fixed-rate mortgage may be the better option. Fixed rate mortgages offer more stability over time compared to adjustable rate mortgages, but adjustable rate mortgages can sometimes offer lower interest rates up front. However, you can get a better deal with an adjustable-rate mortgage if you only intend to keep your home for a few years. The best loan term all depends on your own situation and goals, so think carefully about what is important to you when choosing a mortgage.