June 27, 2022 mortgage rates: fixed rates cool again

A variety of fixed mortgage rates fell today. Average interest rates for 15-year and 30-year fixed mortgages have declined. But we saw another rise in the average 5/1 variable rate mortgage rate.

Mortgage rates have risen steadily since the start of the year and are expected to continue to climb throughout 2022. Of course, interest rates are dynamic and unpredictable, at least on a daily or weekly basis, as they react to a wide variety of economic factors. Currently, two of these factors – inflation and the federal funds rate – are particularly influential. The Federal Reserve has already raised interest rates three times this year and has signaled its intention to raise them again to contain inflation. This will almost certainly mean higher mortgage rates and, for potential borrowers, higher monthly mortgage payments. As such, homebuyers may have a better chance of securing a lower mortgage interest rate sooner rather than later. It’s always a good idea to interview several lenders to compare rates and fees to find the best mortgage for your particular situation.

30 Year Fixed Rate Mortgages

The average interest rate on a standard 30-year fixed mortgage is 5.83%, down 16 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 generally 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 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 5.08%, down 10 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 result in a higher monthly payment. However, as long as you can afford the monthly payments, a 15-year loan has several advantages. These typically include the ability to get a lower interest rate, pay off your mortgage sooner, and pay less total interest over the long term.

5/1 Adjustable Rate Mortgages

A 5/1 variable 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 home before the rate changes, an ARM could be a good option. Otherwise, market fluctuations mean that your interest rate may be much higher once the rate is adjusted.

Mortgage Rate Trends

Although mortgage rates were historically low at the start of 2022, they have been rising steadily since then. The reason: The Federal Reserve raised interest rates 0.75 percentage points this month alone — the biggest rate hike since 1994 — in a bid to rein in record inflation. Generally, when inflation is low, mortgage rates tend to be lower. When inflation is high, rates tend to be higher.

Although the Fed does not set mortgage rates directly, central bank policy actions influence how much you pay to fund your home loan. And the Fed has signaled that it will continue to raise rates this year. So if you’re looking to buy a home in 2022, expect mortgage rates to rise as the year progresses.

We use data collected by Bankrate, which is owned by the same parent company as CNET, to track rate changes over time. This table summarizes the average rates offered by lenders nationwide:

Average Mortgage Interest Rates

Product Assess Last week To change
30 years fixed 5.83% 5.99% -0.16
15 years fixed 5.08% 5.18% -0.10
30-year jumbo mortgage rate 5.79% 5.91% -0.12
30-year mortgage refinance rate 5.80% 5.94% -0.14

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 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, higher down payment, low DTI, low LTV, or any combination of these factors can help you get a lower interest rate. Besides the mortgage rate, other factors, including closing costs, fees, discount points and taxes, can also affect the cost of your home. Be sure to talk to several different lenders — such as local and national banks, credit unions, and online lenders — and a comparison store to find the best loan for you.

What is the best loan term?

An important consideration when choosing a mortgage loan is the length 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. 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, an adjustable rate mortgage’s interest rates are only stable for a certain period of time (usually five, seven or 10 years). After that, the rate fluctuates annually depending on the market interest rate.

An important factor to consider when choosing between a fixed rate and variable rate mortgage is how long you plan to live in your home. Fixed rate mortgages might be better suited if you plan to live in a house for a while. While variable rate mortgages may offer lower interest rates initially, fixed rate mortgages are more stable over time. 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. Be sure to do your research and think about your own priorities when choosing a mortgage.

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