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Almost two years have passed with record mortgage rates. Now 2022 has started with rates up from pre-pandemic levels.

Don’t cancel your home buying plans just yet. Even though rates are higher than they were in 2021, they are still considered “normal” from a historical perspective. Only a few years ago, 30-year fixed rates were in the top 5%.

Either way, home buying decisions take a lot more into consideration besides the interest rate. Buying a house is making a lifestyle choice. What happens in the interest rate market can influence a decision, it is wise not to base it on just a few basis points of a mortgage rate. Setting and sticking to a realistic home buying budget is far more important than the rate you get.

Let’s take a look at current mortgage rates, where rates have been in the past, and what it all means for the borrower.

Looking at today’s mortgage rates, a number of prominent rates have gone up. Rising 30-year fixed mortgage rates are making headlines, but don’t forget about 15-year fixed rates, which have also risen. The most common type of variable rate mortgage is the 5/1 Variable Rate Mortgage (ARM) also checked.

The average mortgage rates are as follows:

Mortgage Rate Forecast: What’s Driving Mortgage Rate Changes?

Mortgage rates have increased due to various economic factors since the beginning of the year. High and persistent inflation matters, Jacob Channel, senior economic analyst at LendingTree, told us. The May inflation report shows inflation at 8.6%, the highest level in 40 years. To combat this inflation, the Federal Reserve raised its benchmark short-term interest rate. As inflation remained higher than expected, the Fed raised rates by 50 basis points in May and 75 basis points in June.

Following the inflation report, mortgage rates soared ahead of the Fed announcement. “I think what we’re seeing is that lenders had already forecasted the Fed was going to raise the fed funds rate by 75 basis points and they started pushing mortgage rates up preemptively,” we said. says Jacob Channel, senior economist at LendingTree. .

Besides the COVID lockdown in China and Russia’s invasion of Ukrainian territory, financial markets are still reacting to other global factors. “We have a lot of factors like that putting upward pressure on mortgage rates,” Channel says. “Volatility has gone through the roof,” Shashank Shekhar, Founder and CEO of InstaMortgage, told us. “The market has adapted to a new round of news virtually every day.”

What do today’s mortgage rates mean for your home buying plans?

2022 started with dramatic rate increases. But historically, mortgage rates remain at relatively normal levels.

With a combination of a limited supply of housing and strong demand, house prices have increased significantly compared to before the pandemic. Higher costs to build homes and massive buyer demand are also contributing to the surge. This, coupled with higher mortgage rates, makes the overall cost of home ownership more expensive for the borrower.

The difference of about half a point can be a lot of money on a 30-year mortgage. But it’s best not to try to time the market to get the best mortgage rate. Instead, experts advise focusing on finding the right home and taking action when your personal lifestyle and financial situation indicate the time is right.

Rates between mortgage lenders can vary greatly. Be sure to shop between a few different mortgage lenders to ensure you get the best current deal. “The rate has a big impact on your monthly affordability as long as you keep that house,” Skylar Olsen, senior economist at Tomo, a digital real estate and mortgage company, told us. “It’s actually a critical part of that decision, and it requires shopping around.”

What to know about loan fees

Whenever you take out a home loan, you’ll want to be aware of closing costs. Closing costs can be anywhere from 3-6% of the loan amount and include fees such as loan origination fees, prepaid interest and property taxes. One way to reduce your outgoings is to accept a higher interest rate in exchange for credit from lenders. You can save money in the short term by using this strategy, so don’t overlook it if you plan to sell your home or refinance in five to eight years.

Current Mortgage Refinance Rates

Refinance rates made headlines today. We have seen a dramatic increase in rates for 30 year fixed loans. Interestingly, 15-year fixed rate refinances moved in the opposite direction and declined. If you’re considering a 10-year refinance loan, just know that average rates have also increased.

The average refinancing rates are as follows:

Take a look at mortgage rates for different loan styles.

30-year mortgage rates

The average 30-year fixed mortgage rate is 5.72%, an increase of 572 basis points from seven days ago.

15-year fixed mortgage rates

The median rate for a 15-year fixed mortgage is 4.89%, an increase of 489 basis points from the same period last week.

The monthly payment for a 15-year fixed rate mortgage is higher and will put more strain on your monthly budget than a 30-year mortgage. But 15-year loans have huge advantages: you’ll pay thousands less in interest and pay off your loan much sooner.

5/1 Adjustable Rate Mortgage Rates

A 5/1 ARM has an average rate of 4.25%, up 425 basis points from seven days ago.

An ARM is ideal for individuals who will sell or refinance before the rate changes. If not, their interest rates could end up being significantly higher after a rate adjustment.

For the first five years, a 5/1 ARM will typically have a lower interest rate than a 30-year fixed mortgage. Keep in mind that your rate could increase and your payment could increase by hundreds of dollars per month.

How We Determine Mortgage Rates

We use daily rate data from Bankrate for our mortgage rate trends. These overnight rates are based on a specific borrower profile, which only includes loans for single-family homes with a loan-to-value ratio of 80% or higher. Bankrate is part of the same parent company as NextAdvisor.

Average rates given below and based on the Bankrate Mortgage Rate Survey:

Updated July 8, 2022.

Frequently Asked Questions (FAQ) About Mortgage Rates:

How to get the best mortgage rate?

Your credit score and loan-to-value (LTV) ratio are the most important factors in determining your interest rate.

To get the lowest mortgage rate, you’ll need a credit score between 700 and 800. Having a credit score above 800 is nice, but probably won’t have a major impact on your rate.

Mortgage providers offer the biggest discounts on mortgage rates to borrowers who are considered less risky. A large down payment is a sign to lenders that you have more upper hand in the game and are less likely to stop making payments. A down payment of 20% or more will save you money in two ways: with a lower mortgage rate, and you can avoid paying for private mortgage insurance (PMI).

When should I lock in my mortgage rate?

It is impossible to know which direction mortgage rates will go from one day to the next. That’s why a mortgage rate lock is such a useful tool, because it protects you if rates go up. And since interest rates are relatively low right now, you should lock in your rate as soon as possible.

When you lock your rate, ask your lender how long the lock is valid. A rate lock can be good for 30-60 days, which will usually give you plenty of time to close before the lock expires. If you want to extend the rate lock, find out about fees, as many lenders charge a fee to extend a rate lock.