The Federal Reserve-Rates Trending upward
Current Mortgage Rates for Oct. 6, 2022: Rates Trend Up
A handful of important mortgage rates rose over the last week. The average 15-year fixed and 30-year fixed mortgage rates both inched up. For variable rates, the 5/1 adjustable-rate mortgage also climbed.
Mortgage rates have been increasing 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
For a 30-year, fixed-rate mortgage, the average rate you’ll pay is 6.89%, which is an increase of 7 basis points from one week ago. (A basis point is equivalent to 0.01%.) The most frequently used loan term is a 30-year fixed mortgage. A 30-year fixed mortgage will often have a greater interest rate than a 15-year fixed rate mortgage — but also a lower monthly payment. 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 6.07%, which is an increase of 10 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 rate will have a higher monthly payment. But a 15-year loan will usually be the better deal, as long as you’re able to afford the monthly payments. These include usually 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 5.34%, an uptick of 14 basis points compared to last week. With an adjustable-rate mortgage 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 shifts with the market rate. Because of this, an adjustable-rate mortgage could be a good option if you plan to sell or refinance your house before the rate changes. But if that’s not the case, you might be on the hook for a much higher interest rate if the market rates shift.
Mortgage rate trends
Though mortgage rates were historically low at the beginning of 2022, they have been rising steadily since. 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 five 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 rates 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:
Average mortgage interest rates
|30-year jumbo mortgage rate
|30-year mortgage refinance rate
Rates as of Oct. 6, 2022.
How to shop for the best mortgage rate
To find a personalized mortgage rate, meet with your local mortgage broker or use an online mortgage service. When shopping around for home mortgage rates, think about 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 the interest rate on your mortgage. 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 factors such as fees, closing costs, taxes and discount points. Make sure to 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 the right fit for you.
What is a good loan term?
One important thing you should consider when choosing a mortgage is the loan term, or payment schedule. The most common loan terms are 15 years and 30 years, although 10-, 20- and 40-year mortgages also exist. Another important distinction is between fixed-rate and adjustable-rate mortgages. The interest rates in a fixed-rate mortgage are the same for the duration 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 fluctuates annually based on the market rate.
One factor 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. Fixed-rate mortgages might be a better fit if you plan on living in a home for quite some time. While adjustable-rate mortgages can sometimes offer lower interest rates upfront, fixed-rate mortgages are more stable over time. However, you could get a better deal with an adjustable-rate mortgage if you only have plans to keep your house for a couple years. There is no best loan term as a rule of thumb; 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.