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The housing market has changed a lot in just one year, and mortgage rates are to blame.
The average interest rate for a 30-year fixed-rate mortgage has doubled, and the highest inflation in 40 years is largely to blame. That inflation has driven the Federal Reserve to its key interest rate multiple times this year.
For homebuyers, those big swings mean higher monthly payments, even as home prices have started to decline in many areas. The most important thing is to make sure that the house you are thinking of buying is one that you can afford. Factor changes in mortgage prices and 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 homebuyers and homeowners.
A variety of notable mortgage rates plunged today. The averages for both the 30-year and 15-year fixed mortgages trended downward. At the same time, average rates on 5/1 adjustable-rate mortgages (ARMs) held steady.
The average mortgage rates are as follows:
Mortgage Rate Forecast: What’s Driving the Mortgage Rate Change?
Inflation has been high this year, with the consumer price index at 7.7% year-over-year in October. That was lower than expected, offering hope that the Federal Reserve’s efforts to raise rates to curb consumer demand are starting to work. The Fed has raised its key interest rate several times this year, most recently by 0.75 percentage point in November, but Chairman Jerome Powell indicated the central bank may start to slow the pace of those increases.
Those factors have pushed mortgage rates higher this year, from around 3.3% in January to more than 7% at the end of October.
“Inflation is absolutely in the driver’s seat, particularly when it comes to mortgage rates. Until we get some sustained evidence that inflation is starting to ease, the upward pressure on mortgage rates will continue,” says Odeta Kushi, deputy chief economist at First American Financial Corporation.
Is it a good time to buy a house with the rates where they are?
The huge increase in mortgage rates this year has put many potential buyers out of the market. That could present opportunities for you, if you can afford the higher cost of borrowing money.
Homebuyers face less competition and prices are down from their all-time highs earlier this year, but they remain high. If you can find a deal that you can afford, it may still be a good deal. After all, no one 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 they love, then they should definitely pull the trigger,” says Joe Allen, a senior mortgage loan officer at Quontic Bank, an online community development financial institution.
Pay attention to loan fees
The general term for what you pay to get a home loan is closing costs. Everything from prepaid property taxes to appraisal fees fall into this category. These fees vary depending on the size of your loan, but are generally 3% to 6% of your loan balance. Keeping track of your closing costs is crucial because a higher closing cost will result in a higher APR.
Looking at today’s mortgage refinance rates
There’s good news if you’ve been considering refinancing because the median rates on 15-year fixed and 30-year fixed refinance loans have dropped. If you’ve been considering a 10-year refinance loan, know that average rates have also seen a decline.
Today’s refinance rates are:
Check the mortgage rates that adapt to your different needs.
30 Year Fixed Rate Mortgage Rates
The median interest rate for a standard 30-year fixed mortgage is 6.78%, which is a 7 basis point decrease from seven days ago.
15-year fixed mortgage rates
The median rate for a 15-year fixed mortgage is 6.12%, which is a 9 basis point decrease from a week ago.
The monthly payment on a 15-year fixed-rate mortgage will be much higher. So finding room in your budget for a monthly payment on a 30-year loan would be less difficult. However, 15-year loans have some considerable benefits: You’ll pay thousands of dollars less in interest, and you’ll pay off your loan much sooner.
Mortgage Rates 5/1 ARM
A 5/1 ARM has an average rate of 5.49%, the same rate compared to a week ago.
An ARM is ideal for borrowers who will refinance or sell before the rate changes. If that’s not the case, your interest rates could end up significantly higher after a rate adjusts.
For the first five years, a 5/1 ARM will generally have a lower interest rate compared to a 30-year fixed mortgage. Keep in mind that your rate could go higher and your payment could grow by hundreds of dollars a month.
How We Calculate Our Mortgage Interest Rates
NextAdvisor’s rate averages are drawn from Bankrate’s daily rate data. 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 better. Bankrate is part of the same parent company as NextAdvisor.
This table has current average rates based on information provided to Bankrate by lenders across the country:
Rates as of November 30, 2022.
Plug and play your desired mortgage or refinance rate and the rest of your loan details in our mortgage calculator to see what your monthly payment would look like.
Frequently asked questions (FAQ) about mortgage rates:
How do I qualify for the lowest mortgage rate?
If you’re looking for the absolute best interest rate, you should focus on two main factors: credit score and loan-to-value (LTV) ratio.
To get the best mortgage rate, you’ll need a credit score between 700 and 800. Having a credit score above 800 is good, but it will likely have minimal impact on your rate.
Lenders provide the largest discounts on mortgage rates to borrowers who are considered less risky. A sizeable down payment is a signal to lenders that you have more skin in the game and are less likely to default. A down payment of 20% or more will save you money in two ways: with a more favorable mortgage rate, and you can avoid paying Private Mortgage Insurance (PMI).
Should I lock in my mortgage rate now?
Mortgage rates go up and down daily and it is impossible to time the market. So locking in your interest rate right now is a good idea because rates are generally historically favorable.
A rate lock will only last for a set period of time, typically 30-60 days. If you run into a snag during closing and it looks like your fixed rate will expire, you should talk to your lender. You can offer a lock extension, however you may need to pay a fee for that privilege.