Mortgage Rates on Aug. 4, 2022: Fixed Rates Decline

A variety of notable mortgage rates slumped again today. The average interest rates for both 15-year fixed and 30-year fixed mortgages went down. The average rate of the most common type of variable-rate mortgage, the 5/1 adjustable-rate mortgage, remained steady.

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 5.52%, which is a decline of 5 basis points from one week ago. (A basis point is equivalent to 0.01%.) Thirty-year fixed mortgages are the most frequently used loan term.

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. You won’t be able to pay off your house as quickly and you’ll pay more interest over time, but a 30-year fixed mortgage is a good option if you’re looking to minimize your monthly payment.

15-year fixed-rate mortgages

The average rate for a 15-year, fixed mortgage is 4.74%, which is a decrease of 8 basis points from seven days ago. You’ll definitely have a larger 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 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 4.18%, the same rate from seven days ago. For the first five years, you’ll usually get a lower interest rate with a 5/1 adjustable-rate mortgage compared to a 30-year fixed mortgage.

However, changes in the market may cause your interest rate to increase after that time, as detailed in the terms of your loan. For borrowers who plan to sell or refinance their house before the rate changes, an ARM might be a good option. If not, changes in the market could significantly increase your interest rate.

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 rates 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:

Today’s mortgage interest rates

Rates accurate as of Aug.

4, 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. Make sure to consider your current finances and your goals when trying to find a mortgage. Things that affect what mortgage rate you might get include: your credit score, down payment, loan-to-value ratio and your debt-to-income ratio.

Having a good credit score, a larger down payment, a low DTI, a low LTV, or any combination of those factors can help you get a lower interest rate. Besides the mortgage rate, additional costs including closing costs, fees, discount points and taxes might also factor into the cost of your home. You should talk to multiple lenders — for example, local and national banks, credit unions and online lenders — and comparison shop to find the best loan for you.

What is a good loan term?

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

The most common mortgage terms are 15 years and 30 years, although 10-, 20- and 40-year mortgages also exist. Mortgages are further divided into fixed-rate and adjustable-rate mortgages. The interest rates in a fixed-rate mortgage are set for the duration of the loan.

For adjustable-rate mortgages, interest rates are stable for a certain number of years (commonly five, seven or 10 years), then the rate fluctuates annually based on the market interest rate. When deciding between a fixed-rate and adjustable-rate mortgage, you should consider the length of time you plan to live 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 may offer lower interest rates upfront, fixed-rate mortgages are more stable in the long term. If you don’t have plans to keep your new home for more than three to 10 years, however, an adjustable-rate mortgage may give you a better deal. There is no best loan term as a general rule; it all depends on your goals and your current financial situation.

It’s important to do your research and think about your own priorities when choosing a mortgage.

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