A few important mortgage rates saw an increase this week. The average interest rates for both 15-year fixed and 30-year fixed mortgages both crept higher. For variable rates, the 5/1 adjustable-rate mortgage held firm.
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 6.57%, which is a growth of 5 basis points compared to one week ago. (A basis point is equivalent to 0.01%.) Thirty-year fixed mortgages are the most common loan term. A 30-year fixed rate mortgage will usually have a smaller monthly payment than a 15-year one — but usually 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 5.93%, which is an increase of 8 basis points from seven days 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, if you can afford the monthly payments, there are several benefits to a 15-year loan. 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 adjustable-rate mortgage has an average rate of 5.45%, the same rate as a week ago. For the first five years, you’ll typically get a lower interest rate with a 5/1 ARM compared to a 30-year fixed mortgage. However, 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 may be a good option. Otherwise, changes in the market means your interest rate might be significantly higher once the rate adjusts.
Mortgage rate trends
Though mortgage rates were historically low at the beginning of 2022, they have been climbing steadily since. The Federal Reserve recently raised interest rates by another 0.5 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 information 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. 28, 2022.
How to find personalized mortgage rates
You can get a personalized mortgage rate by connecting with your local mortgage broker or using an online calculator. In order to find the best home mortgage, you’ll need to consider your goals and current finances.
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. Generally, you want a good credit score, a larger 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 costs such as fees, closing costs, taxes and discount points. You should comparison-shop with multiple lenders — such as credit unions and online lenders in addition to local and national banks — in order to get a mortgage loan that’s best for you.
How does the loan term impact my mortgage?
When picking a mortgage, it’s important to 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. Mortgages are further divided into 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 set for a certain number of years (commonly five, seven or 10 years), then the rate changes annually based on the market rate.
One thing to consider when deciding between a fixed-rate and adjustable-rate mortgage is how long you plan on living in your house. For people who 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 in the long term. 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 is entirely dependent on your situation and goals, so make sure to take into consideration what’s important to you when choosing a mortgage.
