Mortgage rates edged higher for all loan terms compared to a week ago, according to data compiled by Bankrate. Rates for 30-year fixed, 15-year fixed, 5/1 ARMs and jumbo loans jumped.
Mortgage rates have been on a wild ride as of late, with the 30-year fixed briefly reaching 6 percent as the Federal Reserve cracks down on inflation. The rate chart could continue to look choppy — the Fed’s rate-raising stance against inflation also could lead to a recession, and that could cause mortgage rates to retreat.
The central bank raised rates again at its July 27 meeting. The one-two punch of consecutive rate increases of three-quarters of a point are likely to cool the economy. “The cumulative effect of this sharp rise in rates has cooled the housing market and caused the economy to start slowing, but hasn’t done much to lower inflation,” says Greg McBride, CFA, Bankrate chief financial analyst.
|30-year fixed jumbo||6.55%||6.27%||+0.28|
Rates as of September 23, 2022.
The rates listed above are Bankrate’s overnight average rates and are based on the assumptions here. Actual rates listed across the site may vary. This story has been reviewed by in-house editor Bill McGuire. All rate data accurate as of Friday, September 23rd, 2022 at 7:30 a.m.
You can save thousands of dollars over the life of your mortgage by getting multiple offers.
“All too often, some homeowners take the path of least resistance when seeking a mortgage, in part because the process of buying a home can be stressful, complicated and time-consuming,” says Mark Hamrick, Bankrate senior economic analyst. “But when we’re talking about the potential of saving a lot of money, seeking the best deal on a mortgage has an excellent return on investment. Why leave that money on the table when all it takes is a bit more effort to shop around for the best rate, or lowest cost, on a mortgage?”
Mortgage interest rates
30-year fixed-rate mortgage moves up, +0.27%
The average rate you’ll pay for a 30-year fixed mortgage is 6.55 percent, up 27 basis points over the last seven days. Last month on the 23rd, the average rate on a 30-year fixed mortgage was lower, at 5.88 percent.
At the current average rate, you’ll pay $630.75 per month in principal and interest for every $100k you borrow. That’s an additional $15.68 per $100,000 compared to last week.
30-year mortgage vs. 15-year mortgage
Traditional lending practices defer to the 30-year, fixed-rate mortgage as the go-to for most borrowers buying a home because it allows the borrower to disperse payments out over 30 years, keeping their monthly payment lower.
With a 15-year mortgage, however, borrowers can pay off their loan in half the time — if they’re able and willing to enlarge the amount of their monthly loan payment. The primary difference between qualifying for a 15-year versus a 30-year mortgage is that you’ll need a higher income and lower debt-to-income ratio to obtain a 15-year mortgage because the monthly mortgage payments are inflated.
15-year fixed mortgage moves higher,+0.17%
The average 15-year fixed-mortgage rate is 5.73 percent, up 17 basis points from a week ago.
Monthly payments on a 15-year fixed mortgage at that rate will cost $577 per $100,000 borrowed. The bigger payment may be a little tougher to find room for in your monthly budget than a 30-year mortgage payment would, but it comes with some big advantages: You’ll come out several thousand dollars ahead over the life of the loan in total interest paid and build equity much more rapidly.
5/1 ARM trends upward, +0.20%
The average rate on a 5/1 ARM is 4.87 percent, adding 20 basis points over the last 7 days.
Adjustable-rate mortgages, or ARMs, are home loans that come with a floating interest rate. In other words, the interest rate can change from time to time throughout the life of the loan, unlike fixed-rate loans. These loan types are best for those who expect to sell or refinance before the first or second adjustment. Rates could be substantially higher when the loan first adjusts, and thereafter.
While borrowers shunned ARMs during the pandemic days of super-low rates, this type of loan has made a comeback as mortgage rates have risen.
Monthly payments on a 5/1 ARM at 4.87 percent would cost about $525 for each $100,000 borrowed over the initial five years, but could ratchet higher by hundreds of dollars afterward, depending on the loan’s terms.
Jumbo mortgage interest rate moves up, +0.28%
The average rate you’ll pay for a jumbo mortgage is 6.55 percent, an increase of 28 basis points since the same time last week. This time a month ago, the average rate was lower, at 5.87 percent.
At today’s average rate, you’ll pay $630.75 per month in principal and interest for every $100k you borrow. That’s an increase of $15.68 over what you would have paid last week.
Rate review: How mortgage interest rates have moved
- 30-year fixed mortgage rate: 6.55%, up from 6.28% last week, +0.27
- 15-year fixed mortgage rate: 5.73%, up from 5.56% last week, +0.17
- 5/1 ARM mortgage rate: 4.87%, up from 4.67% last week, +0.20
- Jumbo mortgage rate: 6.55%, up from 6.27% last week, +0.28
Interested in refinancing? See rates for home refinance
30-year mortgage refinance moves upward, +0.27%
The average 30-year fixed-refinance rate is 6.55 percent, up 27 basis points from a week ago. A month ago, the average rate on a 30-year fixed refinance was lower, at 5.84 percent.
At the current average rate, you’ll pay $630.75 per month in principal and interest for every $100,000 you borrow. That’s $15.68 higher compared with last week.
Mortgage rate trends: Where rates are headed
Mortgage rates plunged early in the pandemic and scraped record lows — below 3 percent — at the start of 2021. The days of sub-3 percent mortgage interest on the 30-year fixed are behind us, and rates rose past 5 percent in 2022.
“Low interest rates were the medicine for economic recovery following the financial crisis, but it was a slow recovery so rates never went up very far,” says Greg McBride, CFA, Bankrate chief financial analyst. “The rebound in the economy, and especially inflation, in the late pandemic stages has been very pronounced, and we now have a backdrop of mortgage rates rising at the fastest pace in decades.”
Comparing mortgage options
The 30-year fixed-rate mortgage is the most popular loan for homeowners. This mortgage has a number of advantages. Among them:
- Lower monthly payment: Compared to a shorter term, such as 15 years, the 30-year mortgage offers lower payments spread over time.
- Stability: With a 30-year mortgage, you lock in a consistent principal and interest payment. Because of the predictability, you can plan your housing expenses for the long term. Remember: Your monthly housing payment can change if your homeowners insurance and property taxes go up or, less likely, down.
- Buying power: With lower payments, you can qualify for a larger loan amount and a more expensive home.
- Flexibility: Lower monthly payments can free up some of your monthly budget for other goals, like saving for emergencies, retirement, college tuition or home repairs and maintenance.
- Strategic use of debt: Some argue that Americans focus too much on paying down their mortgages rather than adding to their retirement accounts. A 30-year fixed mortgage with a smaller monthly payment can allow you to save more for retirement.
That said, shorter term loans have gained popularity as rates have been historically low. Although they have higher monthly payments compared to 30-year mortgages, there are some big benefits if you can afford the upfront costs. Shorter-term loans can help you achieve:
- Greatly reduced interest costs: Because you pay off the loan faster, you’ll be able to pay less interest overall.
- Lower interest rate: On top of less time for that interest to compound, most lenders price shorter-term mortgages with lower rates.
- Build equity faster: The faster you pay off your mortgage, the faster you’ll own value in your home outright. That’s especially handy if you want to borrow against your property to fund other spending.
- Debt-free sooner: A shorter-term mortgage means you’ll own your house free and clear sooner than you would with a longer-term loan.
Is now a good time to buy a house?
There’s never a straightforward answer to this question. It always depends. Do you have a reliable income, a good credit score and money saved for a down payment and repairs? If you can answer all of those questions affirmatively, you’re ready to buy.
However, the pandemic has exacerbated a shortage of homes, leading to bidding wars and rising prices. Those trends mean it can be a frustrating market for buyers.
What comes next:
- Loans and programs for first time homebuyers
- Everything to know about FHA loans
- What is mortgage escrow?
- What is a mortgage, and how do they work?
- How to get a mortgage
- Mortgage calculator
- Best mortgage lenders