The housing market has changed a lot in just a year, and mortgage rates are to blame.
The average interest rate for a 30-year fixed rate mortgage has doubled, with the highest inflation in 40 years largely to blame. That inflation has led the Federal Reserve to its key interest rate several times already this year.
For homebuyers, those big changes mean higher monthly payments, even as the prices of homes have started to drop in many areas. The most important thing is to ensure that the house you’re thinking of buying is one you can afford. Factor changes to prices and to mortgage rates into your calculations when determining if the monthly payment is something you can manage.
Let’s look at today’s rates and what they mean for buyers and homeowners.
A few notable mortgage rates shrank today. The averages for both 30-year fixed and 15-year fixed mortgages were slashed. We also saw a decline in the average rate of 5/1 adjustable-rate mortgages (ARM).
Mortgage rates currently are:
Mortgage Rate Trends: What’s Behind the Recent Rate Movement?
Persistently high inflation this year has been a principal driver of the upward trend in mortgage rates. The consumer price index was 7.7% year-over-year in October, lower than expected and a promising sign for the economy.
To deal with high inflation, the Federal Reserve has hiked its benchmark short-term interest rate, the federal funds rate, throughout the year, including a fourth consecutive 75-basis-point increase in November. The Fed’s rate increases don’t directly cause changes in mortgage rates, but are based on similar economic factors.
“Strong inflation numbers have never been good for mortgage bonds, which means the mortgage rates are going to trend higher,” says Shashank Shekhar, founder and CEO of InstaMortgage.
Is It a Good Time to Buy a Home With Rates Where They Are?
The big increase in mortgage rates this year has taken a lot of potential homebuyers out of the market. That could present opportunities for you – if you can afford the higher cost of borrowing money.
Homebuyers are facing less competition and prices are down compared to their all-time highs earlier this year, but they’re still high. If you can find a deal you can afford, it can still be a good opportunity. After all, nobody knows what mortgage rates and prices will be like next year, and buying a home is a lifestyle decision, not just a financial one.
“If they find a house that they love, then they should absolutely pull the trigger,” says Joe Allen, a senior mortgage lending officer at Quontic Bank, an online community development financial institution.
What to Know About Loans Fees
The umbrella term for what you pay to take out a mortgage loan is closing costs. This includes lender fees and escrow fees, such as taxes and insurance. In general, closing costs are 3% to 6% of your loan amount, so the larger your mortgage the more you’ll pay as a total dollar amount. Paying attention to the closing costs you pay is important because the higher your closing costs, the higher your annual percentage rate (APR) will be.
Current Mortgage Refinance Rates
There’s good news if you’ve been considering a refinance because the average rates for 15-year fixed and 30-year fixed refinance loans dropped. Shorter term, 10-year fixed-rate refinance mortgages also sank.
Today’s refinance rates are:
Here are mortgage rates for different types of loans.
30-Year Mortgage Rates
The median interest rate for a standard, 30-year, fixed mortgage is 6.54%, which is a decline of 24 basis points from the previous week.
15-Year Fixed Mortgage Interest Rates
The median rate for a 15-year fixed mortgage is 5.90%, which is a decrease of 20 basis points from seven days ago.
A 15-year, fixed-rate mortgage’s monthly payment will be much bigger. So finding room in your budget for a 30-year loan’s monthly payment would be more simple. But, 15-year loans have some considerable benefits: You’ll pay thousands less in interest and pay off your loan much sooner.
5/1 ARM Interest Rates
A 5/1 ARM has an average rate of 5.48%, a fall of 2 basis points compared to last week.
An ARM is ideal for individuals who will refinance or sell before the rate changes. If that’s not the case, their interest rates could end up being noticeably 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 rate could climb higher and your payment might grow by hundreds of dollars a month.
How Our Mortgage Interest Rates Are Calculated
NextAdvisor’s rate averages are pulled from Bankrate’s daily rate data.. These overnight rates are based on a specific borrower profile, which only includes loans for primary residences where the borrower has a FICO score of 740+. Bankrate is part of the same parent company as NextAdvisor.
This table has current average rates based on information provided to Bankrate by lenders from across the nation:
Rates as of December 5, 2022.
Pro Tip
Plug and play your desired mortgage or refinance rate and other estimated figures into our mortgage calculator to get a good idea of what your monthly payment will be.
Mortgage Rate Frequently Asked Questions (FAQ):
How Do I Get the Lowest Mortgage Rate?
Getting loan offers from a few lenders is a great way to qualify for the lowest interest rate.
The mortgage rate you’ll qualify for depends on a variety of factors lenders consider when assessing how likely you are to repay your home loan. Your credit score impacts your mortgage rate. And your loan-to-value (LTV) ratio is also important, so having a more substantial down payment is better for your mortgage rate.
But lenders will evaluate your situation differently. So you can provide the same documentation to three different banks, and get offers with three different mortgage rates and fees that vary just as much.
When Should I Lock in My Mortgage Rate?
Mortgage rates move up and down on a daily basis, and it’s impossible to time the market. So locking in your interest rate right now is a good idea because overall, rates are historically favorable.
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 contact your lender. It may offer an extension of the lock, however, you might have to pay a fee for that privilege.
Clinton Mora is a reporter for Trending Insurance News. He has previously worked for the Forbes. As a contributor to Trending Insurance News, Clinton covers emerging a wide range of property and casualty insurance related stories.