Current Mortgage Interest Rates on Aug. 18, 2022: Rates Go Up

A number of closely followed mortgage rates moved up today. The average 15-year fixed and 30-year fixed mortgage rates both grew. The average rate of the most common type of variable-rate mortgage, the 5/1 adjustable-rate mortgage, also cruised higher.

Though mortgage rates have been rather consistently going up since the start of this year, what happens next depends on whether inflation continues to climb or begins to retreat.

Interest rates are dynamic and unpredictable -- at least on a daily or weekly basis -- and they respond to a wide variety of economic factors. Right now, they're 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, trying to time the market may not play to your favor.

If inflation rises and rates climb, this could translate to higher interest rates and steeper monthly mortgage payments. For this reason, 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 interest rate for a standard 30-year fixed mortgage is 5.60%, which is an increase of 14 basis points as seven days ago. (A basis point is equivalent to 0.01%.) The most common loan term is a 30-year fixed mortgage.

A 30-year fixed rate mortgage will usually have a lower 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 4.89%, which is an increase of 3 basis points from the same time last week. You'll definitely have a bigger monthly payment with a 15-year fixed mortgage compared to a 30-year fixed mortgage, even if the interest rate and loan amount are the same.

But a 15-year loan will usually be the better deal, as long as you can afford the monthly payments. 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 ARM has an average rate of 4.22%, a rise of 3 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 may end up paying more after that time, depending on the terms of your loan and how the rate adjusts with the market rate. Because of this, an ARM may be a good option if you plan to sell or refinance your house before the rate changes. Otherwise, changes in the market means your interest rate could be a good deal higher once the rate adjusts.

Mortgage rate trends

Though mortgage rates were historically low at the beginning of 2022, they have been increasing somewhat steadily since then.

The Federal Reserve recently raised interest rates by another 0.75 percentage points in an attempt to curb record-high inflation. The Fed has raised rates a total of four 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 in 2022, keep in mind that the Fed has signaled it will continue to raise rates, and mortgage rates could increase as the year goes on.

Whether rates follow their upward projection or begin to level out hinges on if inflation actually slows. 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 across the country:

Current average mortgage interest rates

Loan type Interest rate A week ago Change
30-year fixed rate[1] 5.60% 5.46% +0.14
15-year fixed rate[2] 4.89% 4.86% +0.03
30-year jumbo mortgage rate 5.60% 5.43% +0.17
30-year mortgage refinance rate 5.59% 5.41% +0.18

Updated on Aug.

18, 2022.

How to find personalized mortgage rates

You can get a personalized mortgage rate by reaching out to your local mortgage broker or using an online calculator. When researching home mortgage rates, 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 interest rate.

Generally, you want a good credit score, a higher 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 factors such as fees, closing costs, taxes and discount points. You should speak with multiple lenders -- like local and national banks, credit unions and online lenders -- and comparison shop to find the best mortgage for you.

How does the loan term impact my mortgage?

One important thing to consider when choosing a mortgage is the loan term, or payment schedule.

The loan 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 set for the life of the loan.

Unlike a fixed-rate mortgage, the interest rates for an adjustable-rate mortgage are only stable for a certain amount of time (typically five, seven or 10 years). After that, the rate fluctuates annually based on the market interest rate. One thing to take into consideration when deciding between a fixed-rate and adjustable-rate mortgage is the length of time you plan on staying in your house.

For those who plan on staying long-term in a new house, fixed-rate mortgages may be the better option. While adjustable-rate mortgages might have lower interest rates upfront, fixed-rate mortgages are more stable over time. However you may get a better deal with an adjustable-rate mortgage if you only intend to keep your home for a few years.

There is no best loan term as an overarching rule; it all depends on your goals and your current financial situation.

Be sure to do your research and think about what's most important to you when choosing a mortgage.

References

  1. ^ 30-year fixed rate (www.cnet.com)
  2. ^ 15-year fixed rate (www.cnet.com)