Mortgage rates were down across all terms from a week ago, according to data compiled by Bankrate. Rates for 30-year fixed, 15-year fixed, 5/1 ARMs and jumbo loans all declined.
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||5.45%||5.67%||-0.22|
Rates as of August 3, 2022.
The rates listed above are averages based on the assumptions shown here. Actual rates displayed within the site may vary. This story has been reviewed by Bill McGuire. All rate data accurate as of Wednesday, August 3rd, 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 mortgage rate retreats, -0.23%
The average rate for a 30-year fixed mortgage is 5.47 percent, a decrease of 23 basis points from a week ago. A month ago, the average rate on a 30-year fixed mortgage was higher, at 5.57 percent.
At the current average rate, you’ll pay a combined $561.53 per month in principal and interest for every $100k you borrow. That’s down $15.07 from what it would have been last week.
15-year mortgage eases,-0.16%
The average rate you’ll pay for a 15-year fixed mortgage is 4.71 percent, down 16 basis points over the last week.
Monthly payments on a 15-year fixed mortgage at that rate will cost roughly $517 per $100k borrowed. That may put more pressure on your monthly budget than a 30-year mortgage 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 quickly.
5/1 adjustable rate mortgage trends down, -0.03%
The average rate on a 5/1 adjustable rate mortgage is 4.16 percent, down 3 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 intermittently throughout the life of the loan, unlike fixed-rate mortgages. These loan types are best for those who expect to refinance or sell before the first or second adjustment. Rates could be much 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 4.16 percent would cost about $482 for each $100,000 borrowed over the initial five years, but could increase by hundreds of dollars afterward, depending on the loan’s terms.
Jumbo mortgage falls, -0.22%
Today’s average rate for jumbo mortgages is 5.45 percent, a decrease of 22 basis points since the same time last week. Last month on the 3rd, the average rate was greater than 5.45, at 5.50 percent.
At today’s average jumbo rate, you’ll pay a combined $561.53 per month in principal and interest for every $100,000 you borrow. That’s lower by $15.07 than it would have been last week.
In summary: How interest rates have shifted
- 30-year fixed mortgage rate: 5.47%, down from 5.70% last week, -0.23
- 15-year fixed mortgage rate: 4.71%, down from 4.87% last week, -0.16
- 5/1 ARM mortgage rate: 4.16%, down from 4.19% last week, -0.03
- Jumbo mortgage rate: 5.45%, down from 5.67% last week, -0.22
Interested in refinancing? See mortgage refinance rates
30-year fixed-rate refinance slides, –0.22%
The average 30-year fixed-refinance rate is 5.45 percent, down 22 basis points over the last seven days. A month ago, the average rate on a 30-year fixed refinance was higher, at 5.52 percent.
At the current average rate, you’ll pay $561.53 per month in principal and interest for every $100,000 you borrow. That’s down $15.07 from what it would have been 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.
Lock your mortgage rate now or wait?
A rate lock guarantees your mortgage interest rate for a specified period of time. Lenders often offer 30-day rate locks for a nominal fee or roll the price of the lock into your loan. Some lenders will lock rates for longer periods, even exceeding 60 days, but those locks can be pricey. In today’s unstable market, some lenders will lock an interest rate for only two weeks to avoid unnecessary risk.
With a rate lock, if interest rates rise, you’re locked into the guaranteed rate. You may be able to find a lender that offers a floating rate lock. A floating rate lock lets you get a lower rate if interest rates decline before closing your loan. It could be worth the cost in a declining rate environment. Because there is no guarantee of where mortgage rates will head in the future, it may be smart to lock in a low rate instead of holding out on rates for potentially decline further.
Remember: During the pandemic, all aspects of real estate and mortgage closings are taking much longer than usual. Expect the closing on a new mortgage to take at least 60 days, and expect refinancing to take at least a month.
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