Looking at today’s mortgage rates a number of notable rates climbed higher. The averages for both 30-year fixed and 15-year fixed mortgages both crept higher. The most common type of variable-rate mortgage is the 5/1 adjustable-rate mortgage (ARM) also ticked up.
Once we turned the calendar to 2022, mortgage rates changed course and jumped well above the lows we’ve seen in recent years. Now we are seeing the highest rates for 30-year mortgages since 2011.
In spite of this, demand for homes has remained strong due in part to housing construction not keeping up with the need for new homes. That means that for home buyers finding a house has not gotten any easier.
You can’t control the housing market or what direction mortgage rates are headed, but you can take steps to put your best foot forward. You can get a better deal on your next mortgage by saving money for a bigger down payment, improving your credit rating and comparing offers from multiple lenders.
Let’s take a look at where rates are currently and what it means for you.
Take a look at today’s rates:
Mortgage Rate Trends: What’s Behind the Recent Rate Movement?
Long-term mortgage rate trends are closely tied to the 10-year Treasury bond rates, as bond yields go up, 30-year mortgage rates typically move in tandem. Bond yields, and mortgage rates, are impacted by a wide range of economic conditions. Currently, steep inflation and the Federal Reserve Bank’s monetary policy are two strong drivers behind the recent surge in rates.
The Federal Reserve has already begun raising short-term interest rates, which puts upwards pressure on mortgage rates and it has clearly communicated its intention to continue raising short-term rates. The Fed is slowly increasing rates in an effort to combat skyrocketing inflation, which hit a 40-year high of 8.5% in March, according to the most recent Consumer Price Index (CPI) compiled by the Bureau of Labor Statistics. Sharp increases in the cost of food, fuel and housing were behind this steep climb.
Is It a Good Time to Buy a Home With Rates Where They Are?
Even after the dramatic rises in mortgage rates, they remain within a normal historical range.
Low interest rates were helping to offset rising home prices. But right now, the steep increase in rates has lead to higher costs for home buyers. Prices are up significantly from before the pandemic, with a combination of limited supply of homes, higher costs to build homes and massive demand from buyers leading to the surge.
It’s also important to remember that while mortgage rates are matter, experts advise against trying to time the market to get the best mortgage rate. Start the home buying process when it’s the next best step for your life circumstances and you have the finances to maintain homeownership. Make sure you shop around to find the best mortgage lender at that time because lenders’ rates and fees can vary widely.
Why Is It Important to Look at the History of the 30-Year Fixed Mortgage Rate?
Compared to 2020 and 2021, today’s rates are higher, but looking at prior years they aren’t outside of normal ranges. With this in mind, elevated mortgage rates don’t have to get in the way of becoming a homeowner in today’s market.
While NextAdvisor typically uses Bankrate data on mortgage rates, this chart pulls data from the government-sponsored entity, Freddie Mac. The Freddie Mac data stretches back decades, giving us a better view of the historical rate trends.
Closing Costs & Loan Fees
If you take out a home loan, be sure to pay close attention to the closing costs. The closing costs can be anywhere from 3-6% of the loan amount, including origination fees, prepaid interest, and property taxes.. Choosing a higher interest rate in exchange for lender credit can reduce your upfront costs. The strategy can save you money in the short-term, so it’s worth considering if you plan to sell or refinance your home within five to eight years.
Looking at Today’s Mortgage Refinance Rates
Checking in on refinance mortgage rates, today the average rate nationwide for a 30-year fixed refinance saw a decrease, while 15-year fixed Refinance rates ticked up. Shorter term, 10-year fixed-rate refinance mortgages increased.
Today’s refinance rates are:
30-Year Fixed-Rate Mortgage Rates
The 30-year fixed-mortgage rate average is 5.45%, which is an increase of 3 basis points from seven days ago.
15-Year Fixed-Rate Mortgage Rates
The median rate for a 15-year fixed mortgage is 4.65%, which is an increase of 1 basis point compared to a week ago.
A 15-year, fixed-rate mortgage’s monthly payment is, without a doubt, a much bigger monthly payment than what you’d get with a 30-year mortgage offering the same interest rate. However, 15-year loans have some considerable benefits: You’ll save thousands of dollars in interest and pay off your loan much faster.
5/1 ARM Mortgage Rates
A 5/1 ARM has an average rate of 3.71%, which is an increase of 5 basis points from the same time last week.
An adjustable-rate mortgage is ideal for borrowers who will refinance or sell before the rate changes. If that’s not the case, their interest rates could end up being significantly higher after a rate adjusts.
For the first five years, a 5/1 ARM will typically have a lower interest rate compared to a 30-year fixed mortgage. Keep in mind that your payment could end up being hundreds of dollars higher after a rate adjustment, depending on the terms of your loan.
How Our Mortgage Rates Are Calculated
To see where mortgage rates are going, we rely on information collected by Bankrate, which is owned by the same parent company as NextAdvisor. The daily rates survey focuses on home loans where the borrower has a FICO score of 740 or more, a loan-to-value ratio (LTV) of 80% or better, and the home is a primary residence.
This table has current average rates based on information provided to Bankrate by lenders nationwide:
Rates as of May 3, 2022.
Mortgage Rate Frequently Asked Questions (FAQ):
How Do I Get the Best Mortgage Rate?
If you’re looking for the absolute best mortgage rate you should focus on two main considerations: Credit score, and loan-to-value ratio (LTV)..
These days, a credit score over 750 will help you secure the best rate. However, even a score of over 700 can get you a noticeable rate reduction compared to a lower credit score. Once your score starts climbing above 800, the interest rate discount won’t be meaningful.
Lenders provide the most substantial mortgage rate discounts to borrowers that are deemed less risky. A sizeable down payment is a signal to lenders that you are more committed and are less likely to stop making payments. A down payment of 20% or more will save you money in two ways: with a more favorable mortgage rate, and you’ll be able to avoid paying for private mortgage insurance (PMI).
Should I Lock in My Mortgage Rate Now?
It’s impossible to know what direction mortgage rates will go from day to day. That’s why a mortgage rate lock is such a useful tool because it protects you if rates go up. And with interest rates being relatively low right now, you should lock in your rate as soon as you can.
A rate lock will only last for a set amount of time, typically 30-60 days. If you hit a snag during closing and it looks like your rate lock will expire you should talk with your lender. It may offer an extension of the lock, however, you might have to pay a fee for that privilege.