Jason Stauffer is a journalist based in Chicago covering personal finance for NextAdvisor. His previous work includes…
A number of principal mortgage rates all crept higher today. Both 30-year fixed and 15-year fixed mortgage rates saw growth. The most common type of variable-rate mortgage is the 5/1 adjustable-rate mortgage (ARM) also trended upward.
Mortgage rates continued their march higher following a surprisingly positive jobs report on Friday. The economy added 467,000 in January, according to the latest data released by the U.S. Bureau of Labor Statistics. At the same time the economy is recovering, inflation remains high, both of these factors are rapidly pushing long-term mortgage interest rates toward 4%.
The average mortgage rates are as follows:
This year started off with mortgage rates surging to near prepandemic levels. A healthy economy and soaring inflation have helped to push rates up. At the same time, Omicron and the threat of other variants remain, and could mute the rise in mortgage rates in the future. The overall consensus is for rates to go up in 2022, and the decision by the Federal Reserve to reduce its bond purchases will contribute to that.
The current trends in mortgage rates shouldn’t derail your plans to buy a home, as long as it makes sense for you at the time. However, some homebuyers may need to adjust their budgets due to the recent increase in interest rates.
The 2022 housing market is forecast to be just a bit more reasonable. Even with a slight cold down in the housing market, it will still heavily favor sellers. Home prices are expected to rise in 2022, but much more slowly than their rates of appreciation in 2022. And overall rates should still remain historically favorable.
If you take out a mortgage, your decision should factor in the loan’s closing costs. The closing costs can be anywhere from 3-6% of the loan amount, including origination fees, prepaid interest, and property taxes.. It is possible to reduce your out of pocket costs by accepting a higher interest rate in exchange for lender credits. You can save money in the short term by using this strategy, so don’t overlook it if you plan on selling your house or refinancing in five to eight years.
Refinancing became a bit more expensive today as 30-year fixed and 15-year fixed refinance mortgages saw their mean rates go higher. Shorter term, 10-year fixed-rate refinance mortgages also moved up.
Take a look at today’s refinance rates:
Current Mortgage Rates.
The 30-year fixed-mortgage rate average is 3.95%, which is a growth of 21 basis points from last week.
The median rate for a 15-year fixed mortgage is 3.31%, which is an increase of 14 basis points compared to a week ago.
A 15-year, fixed-rate mortgage’s monthly payment will be much bigger. So finding room in your budget for a 30-year loan’s monthly payment would be easier. But, 15-year loans have some considerable benefits: You’ll pay thousands less in interest and pay off your loan much sooner.
A 5/1 ARM has an average rate of 2.85%, which is an addition of 3 basis points compared to last week.
An ARM is ideal for borrowers who will refinance or sell before the rate changes. If that’s not the case, their interest rates could end up being noticeably higher after a rate adjusts.
For the first five years, a 5/1 ARM will typically have a lower interest rate compared to a 30-year fixed mortgage. Keep in mind that depending on how much your loan’s rate adjusts, your payment has the potential to increase by a large amount.
To see where mortgage rates are going, we rely on information collected by Bankrate, which is owned by the same parent company as NextAdvisor. The daily rates survey focuses on home loans where the borrower has a high credit score (740+), a LTV of 80% or lower, and the home is a primary residence.
This table has current average rates based on information provided to Bankrate by lenders from across the country:
Rates as of February 7, 2022.
Use our mortgage calculator to see how your mortgage payment changes based on elements like your mortgage interest rate, down payment, and homeowners insurance.
There are two key factors to getting the best mortgage interest rate: Loan-to-value ratio (LTV), and your credit score.
To get the best mortgage rate, you’ll need a credit score between 700 to 800. Having a credit score above 800 is nice, but will likely have no major impact on your rate.
Mortgage providers give the largest mortgage rate reductions to borrowers that are seen as less risky. One surefire way to show you’re a less risky borrower is to make a larger down payment. A down payment of 20% or more will save you money in two ways: with a more favorable mortgage rate, and you’ll be able to avoid paying for private mortgage insurance (PMI).
It’s impossible to know what direction mortgage rates will go from day to day. That’s why a mortgage rate lock is such a useful tool because it protects you if rates go up. And with interest rates being relatively low right now, you should lock in your rate as soon as you can.
A rate lock will only last for a set amount of time, typically 30-60 days. If you hit a snag during closing and it looks like your rate lock will expire you should talk with your lender. It may offer an extension of the lock, however, you might have to pay a fee for that privilege.
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At NextAdvisor we’re firm believers in transparency and editorial independence. Editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by our partners. We do not cover every offer on the market. Editorial content from NextAdvisor is separate from TIME editorial content and is created by a different team of writers and editors.
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