Mortgage rates today, July 26, 2022 | Prices rejected
After almost two years of record-low mortgage rates, 2022 began with interest rates rising to almost levels not seen since the pandemic.
That doesn’t mean you have to cancel your home buying plans. Yes, rates are higher than they were in 2021, but it’s important to remember that 30-year fixed rates are still close to where they were a few years ago.
In addition, there is much more to the decision to buy a home than just the interest rate. Buying a home is all about making a lifestyle choice. While the mortgage rate market can influence a decision, it’s wise not to base it on just a few basis points of a mortgage rate. The most important thing is to set a realistic home buying budget and stick to it.
Let’s take a look at current mortgage rates, where rates have historically been, and what it all means for the borrower.
Some benchmark mortgage rates have eased today. Interest rates on 30-year fixed-rate mortgages have fallen, while interest rates on 15-year fixed-rate mortgages have remained flat on average. The most common type of adjustable rate mortgage is the 5/1 adjustable rate mortgage (ARM), which has sunk lower.
The averages for 30-year fixed, 15-year fixed, and 5/1 ARMs are:
Mortgage Rate Forecast: What’s Driving the Change in Mortgage Rates?
The increase in mortgage rates this year is due to a variety of economic factors. Persistently high inflation is a big deal, Jacob Channel, senior economic analyst at LendingTree, told us. The June inflation report shows inflation at 9.1%, the highest in 40 years. In response, the Federal Reserve raised its short-term benchmark interest rate to combat this inflation. The Fed raised rates by 50 basis points in May, 75 basis points in June and is expected to raise another 75 points in July.
Recently we saw mortgage rates rise after the inflation report and before the Fed’s announcement. “I think what we’re seeing is that lenders were already expecting the Fed to hike interest rates by 75 basis points and they started raising mortgage rates preemptively,” Jacob Channel, Senior Economist, told us at LendingTree.
Energy prices are responsible for half of that increase, Dawit Kebede, senior economist at the Credit Union National Association, said in a statement. “There are signs that some of the main drivers of inflation are easing, such as lower oil and other commodity prices in July, slower wage growth and easing pressures on the supply chain. However, price increases in services, led by housing construction and pent-up demand for vehicles, will keep inflation high in the coming months.”
What do today’s mortgage rates mean for your home buying plans?
The year 2022 started with dramatic rate increases. From a historical perspective, however, mortgage rates remain at relatively normal levels.
Due to a combination of limited housing supply and strong demand, house prices have risen significantly from before the pandemic. The higher cost of building homes and massive demand from buyers are also contributing to the rise. This and higher mortgage interest rates make the overall cost of home ownership more expensive for the borrower.
The difference of about half a point can add up to a lot of money on a 30-year mortgage. But it’s best not to try to time the market to get the best mortgage rate. Instead, experts advise focusing on finding the right home and taking action when your personal lifestyle and financial situation indicate the right time.
Interest rates between mortgage lenders can vary significantly. Make sure you shop around between a few different mortgage lenders to make sure you’re getting the best current deal. “The interest rate has a big impact on your monthly affordability as long as you own this house,” Skylar Olsen, chief economist at Tomo, a digital real estate and mortgage company, told us. “It’s actually a critical part of that decision, and to do that, you have to look around.”
What you should know about loan fees
Closing cost is the umbrella term for what you pay to take out a mortgage loan. The fees for your appraisal, title insurance, and any lender fees are part of your closing costs. These fees vary depending on the amount of your loan, but are typically 3% to 6% of your loan balance. Your closing costs play a crucial role in determining your Annual Percentage Rate (APR). In other words, the higher your closing cost, the higher your APR will be.
Today’s mortgage refinancing rates
There’s good news if you’re considering refinancing, as average interest rates on 15-year and 30-year fixed refinance loans have fallen. Short-term 10-year fixed-rate refinancing mortgages also fell.
The average refinancing rates are as follows:
Find current mortgage rates for today.
30 year fixed rate mortgage rates
On a 30-year fixed-rate mortgage, you’re paying an average of 5.71%, down 2 basis points from seven days ago.
Interest rates for 15-year fixed-rate mortgages
The median interest rate on a 15-year fixed-rate mortgage is 4.92%, which is the same rate as a week ago.
The monthly payment of a 15-year fixed-rate mortgage is higher and puts more strain on your monthly budget than a 30-year mortgage. However, 15-year loans have some significant advantages: you save thousands of dollars in interest and pay off your loan much sooner.
5/1 adjustable rate mortgage rates
A 5/1 ARM has an average rate of 4.19%, down 2 basis points from last week.
An adjustable rate mortgage is ideal for households looking to refinance or sell before the interest rate changes. If they don’t, their interest rates could be significantly higher after an interest rate reset.
For the first five years, a 5/1 ARM typically has a lower interest rate than a 30-year fixed-rate mortgage. Keep in mind that depending on the terms of your loan, your payment could be hundreds of dollars higher after an interest rate adjustment.
How we calculate our mortgage rates
NextAdvisor average mortgage rates are pulled from daily interest rate data from Bankrate. These daily interest rates are based on a specific borrower profile that includes only single-family home loans with an 80% LTV or better. Bankrate is part of the same parent company as NextAdvisor.
The average rates are listed below and are based on Bankrate’s Mortgage Rate Survey:
Prices valid from July 26, 2022.
Mortgage Rate Frequently Asked Questions (FAQ):
How can I get the best mortgage rate?
There are two main factors in getting the lowest interest rate: the loan-to-value ratio (LTV) and your creditworthiness.
To get the best mortgage rate, it is best to have a credit score between 700 and 800. A credit score above 800 is nice, but probably won’t affect your rate much.
Lenders offer the biggest mortgage rate cuts to homebuyers who are considered less risky. A surefire way to signal that you’re a less risky borrower is to make a higher down payment. With a down payment of 20% or more, you’ll save twice as much: get a lower mortgage rate and avoid paying out Personal Mortgage Insurance (PMI).
Is it a good idea to fix my mortgage payment now?
It is impossible to know in which direction mortgage rates will move from one day to the next. This is why a mortgage interest rate freeze is such a useful tool, as it protects you when interest rates rise. And since interest rates are currently relatively low, you should secure your interest rate as soon as possible.
A rate lock only lasts for a set period of time, typically 30-60 days. If you hit a snag when closing and it seems like your rate lock is about to expire, you should contact your lender. It may be able to extend the rate lock, but you may have to pay a fee for the privilege.