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Mortgage rates remain relatively unchanged today following yesterday’s Consumer Price Index data release, which showed that inflation slowed more than expected in October.
On a weekly basis, average rates trended back up above 7%, Freddie Mac said on Thursday, reflecting the higher rates we saw earlier this week. But rates have trended back down over the past few days, with 30-year fixed rates now holding steady below 7%.
October’s cooling CPI report is great news for mortgage rates and the broader economy. Though inflation still remains elevated, it’s finally starting to look like the Federal Reserve’s efforts are paying off.
The Fed has been aggressively hiking the federal funds rate this year to try to cool the overheated economy. As inflation starts to come down to a more sustainable level, the Fed may be able to ease the pace of its hikes, which would likely keep mortgage rates from increasing further.
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Use our free mortgage calculator to see how today’s interest rates will affect your monthly payments.
By clicking on “More details,” you’ll also see how much you’ll pay over the entire length of your mortgage, including how much goes toward the principal vs. interest.
30-year fixed mortgage rates
The current average 30-year fixed mortgage rate is 7.08%, according to Freddie Mac. This is an increase from the previous week.
The 30-year fixed-rate mortgage is the most common type of home loan. With this type of mortgage, you’ll pay back what you borrowed over 30 years, and your interest rate won’t change for the life of the loan.
The lengthy 30-year term allows you to spread out your payments over a long period of time, meaning you can keep your monthly payments lower and more manageable. The trade-off is that you’ll have a higher rate than you would with shorter terms or adjustable rates.
15-year fixed mortgage rates
The average 15-year fixed mortgage rate is 6.38%, an increase from the prior week, according to Freddie Mac data. The last time this rate was above 6% was in 2008.
If you want the predictability that comes with a fixed rate but are looking to spend less on interest over the life of your loan, a 15-year fixed-rate mortgage might be a good fit for you. Because these terms are shorter and have lower rates than 30-year fixed-rate mortgages, you could potentially save tens of thousands of dollars in interest. However, you’ll have a higher monthly payment than you would with a longer term.
5/1 adjustable mortgage rates
The average 5/1 adjustable mortgage rate is 6.06%, an increase from the previous week. This is also the first time this rate has surpassed 6% since 2008.
Adjustable rate mortgages can look very attractive to borrowers when rates are high, because the rates on these mortgages are typically lower than fixed mortgage rates. A 5/1 ARM is a 30-year mortgage. For the first five years, you’ll have a fixed rate. After that, your rate will adjust once per year. If rates are higher when your rate adjusts, you’ll have a higher monthly payment than what you started with.
If you’re considering an ARM, make sure you understand how much your rate could go up each time it adjusts and how much it could ultimately increase over the life of the loan.
Will mortgage rates go up in 2022?
To help the US economy during the COVID-19 pandemic, the Federal Reserve aggressively purchased assets, including mortgage-backed securities. This helped keep mortgage rates at historic lows.
However, the Fed has begun to reduce the assets it holds and is expected to increase the federal funds rate two more times in 2022, following increases at its last five meetings.
Though not directly tied to the federal funds rate, mortgage rates are sometimes pushed up as a result of Fed rate hikes and investor expectations of how those hikes will impact the economy.
Inflation remains elevated, but has started to slow, which is a good sign for mortgage rates and the broader economy.
What is a fixed-rate mortgage vs. adjustable-rate mortgage?
Historically, adjustable mortgage rates tend to be lower than 30-year fixed rates. When mortgage rates go up, ARMs can start to look like the better deal — but it depends on your situation.
Fixed-rate mortgages lock in your rate for the entire life of your loan. Adjustable-rate mortgages lock in your rate for the first few years, then your rate goes up or down periodically.
Because adjustable rates start low, they are worthwhile options if you plan on selling your home before the interest rate changes. For instance, if you get a 7/1 ARM and want to move before the seven year fixed-rate period is up, you won’t risk paying a higher rate later.
But if you want to buy a forever home, a fixed rate could still be a better fit, since you won’t chance your rate increasing in a few years.
Are HELOCs a good idea right now?
Many homeowners gained a lot of equity over that past couple of years as home prices increased at an unprecedented rate. But because rates are so high now, tapping into that equity can be expensive.
For homeowners looking to leverage their home’s value to cover a big purchase — such as a home renovation — a home equity line of credit (HELOC) may still be a good option.
A HELOC is a line of credit that lets you borrow against the equity in your home. It works similarly to a credit card in that you borrow what you need rather than getting the full amount you’re borrowing in a lump sum.
Depending on your finances and the type of HELOC you get, you may be able to get a better rate with a HELOC than you would with a home equity loan or a cash-out refinance. Just keep in mind that HELOC rates are variable, so if rates start to trend up further, yours will likely increase, as well.