Mortgage rates rose for all types of loans compared to a week ago, according to data compiled by Bankrate. 30-year fixed, 15-year fixed, 5/1 ARM and jumbo loan rates rose.
Rates as of May 4, 2022.
These rates are Bankrate’s average overnight rates and are based on the assumptions stated here. Actual rates listed on the site may vary. This story has been reviewed by Bill McGuire. All fare data is accurate as of Wednesday, May 4, 2022 at 7:30 am
You can save thousands of dollars over the life of your mortgage by getting multiple offers. “It’s very important to shop around,” says Greg McBride, CFA, chief financial analyst at Bankrate. “Not everyone offers the same price, and some lenders may be motivated to be very competitive on price.”
Mortgage rates for home purchase
30-year mortgage advances, +0.08%
The average rate for the benchmark 30-year fixed mortgage is 5.50 percent, an increase of 8 basis points in the last seven days. A month ago, the average rate on a 30-year fixed mortgage was lower, at 4.86 percent.
At the current average rate, you’ll pay a combined $561.53 per month in principal and interest for every $100,000 you borrow.
While the 30-year rate is the most popular mortgage term, as with any financial product, the 30-year mortgage does have some drawbacks, including:
- Plus total interest paid. A 30-year term means you’ll pay more interest overall than you would on a shorter-term loan.
- Higher mortgage rates. Compared to 15-year loans, lenders charge higher interest rates for 30-year loans because they bear the risk of not being repaid for a longer period of time.
- Slower stock growth. The amortization table for a 30-year mortgage reveals a harsh reality: In the early years, nearly all of your payments go toward interest rather than principal. A 15-year loan brings a higher monthly payment but a much faster payment of the loan amount.
- Buy a house more expensive than it should. Just because you can afford more on a 30-year loan doesn’t mean you should stretch your budget to the limit. Give yourself a break for other financial goals and unexpected expenses. Use Bankrate’s Home Affordability Calculator to determine how much home you can afford.
- 30-year fixed mortgage rate: 5.50%, compared to 5.42% last week, +0.08
- 15-year fixed mortgage rate: 4.71%, compared to 4.66% last week, +0.05
- ARM 5/1 Mortgage Rate: 3.77%, vs. 3.67% last week, +0.10
- Jumbo mortgage rate: 5.48%, compared to 5.38% last week, +0.10
- Lower monthly payment: Compared to a shorter term, such as 15 years, the 30-year mortgage offers lower payments spread out over time.
- Stability: With a 30-year mortgage, you ensure a steady payment of principal and interest. Because of the predictability, you can plan your housing expenses for the long term. Remember: Your monthly house payment can change if your home insurance and property taxes go up or, less likely, go down.
- Purchasing power: With lower payments, you may 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 are too focused on paying off their mortgages instead of increasing their retirement accounts. A 30-year fixed mortgage with a lower monthly payment may allow you to save more for retirement.
- Very low interest costs: Because you pay off the loan faster, you’ll be able to pay less interest overall.
- Lowest interest rate: In addition to less time for that interest to accrue, most lenders price short-term mortgages at lower rates.
- Generate capital faster: The faster you pay off your mortgage, the faster you’ll own the full value of your home. That’s especially useful if you want to borrow against your property to finance other expenses.
- Debt free before: A shorter term mortgage means that you will own your home free and clear sooner than you would with a longer term loan.
15-year fixed mortgage rate increases, +0.05%
The average 15-year fixed mortgage rate is 4.71 percent, up 5 basis points from last week.
Monthly payments on a 15-year fixed mortgage at that rate will cost $517 for every $100,000 borrowed. That’s clearly much higher than the monthly payment would be on a 30-year mortgage at that rate, but it has some big advantages: You’ll save thousands of dollars over the life of the loan in total interest paid, and you’ll build equity much faster.
5/1 ARM sube, +0.10%
The average rate on a 5/1 ARM is 3.77 percent, rising 10 basis points in the last 7 days.
Adjustable-rate mortgages, or ARMs, are home loans that come with a floating interest rate. To put it another way, the interest rate may change from time to time throughout the life of the loan, unlike fixed-rate loans. These types of loans are best for people hoping to refinance or sell before the first or second adjustment. Rates could be much higher when the loan is first adjusted and later.
Monthly payments on a 5/1 ARM at 3.77 percent would cost about $461 per $100,000 borrowed for the first five years, but could go up hundreds of dollars later, depending on the terms of the loan.
Jumbo loan interest rate rises, +0.10%
The average rate you’ll pay on a jumbo mortgage is 5.48 percent, an increase of 10 basis points from a week ago. On the 4th of last month, the median rate on jumbo mortgages was below that, at 4.83 percent.
At the current average rate for a jumbo loan, you’ll pay principal and interest of $561.53 for every $100,000 you borrow. That’s an increase of $7.47 over what you would have paid last week.
In Brief: How Mortgage Rates Have Changed This Week
Interested in refinancing? See mortgage refinancing rates
The refinancing of 30-year mortgages rises, +0.01%
The average 30-year fixed refinance rate is 5.44 percent, 1 basis point higher than the same period last week. A month ago, the average 30-year fixed refinance rate was lower, at 4.82 percent.
At the current average rate, you’ll pay $561.53 per month in principal and interest for every $100,000 you borrow.
Where are mortgage rates headed?
Mortgage rates plummeted early in the pandemic and hit record lows, below 3 percent, in early 2021. However, the new year has been marked by rising rates. Gone are the days of sub-3 percent mortgage interest on the 30-year fixed, and many experts believe the average rate on this loan will be 3.5 to 4 percent by the end of 2022. That’s still great, though. by historical standards. The ultra-low rates of 2020 and 2021 were an anomaly, but even 4 percent is a deal in the scheme of things.
“Mortgage rates continue to rise, as they have since the beginning of the year, as the outlook for Federal Reserve rate hikes that are sooner and faster than expected is shaping up,” says McBride. “Mortgage rates are still well below 4 percent, but in an environment of already sky-high home prices, more potential buyers are hurt with every move higher in mortgage rates.”
Comparison of mortgage terms
The 30-year fixed mortgage is the most popular loan for homeowners. This type of loan has a number of advantages, including:
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 great benefits if you can afford the upfront costs. Short-term loans can help you achieve:
Why do mortgage rates change?
A number of economic factors influence mortgage rates. Among them are inflation and unemployment. Higher inflation generally leads to higher mortgage rates. The opposite is also true; when inflation is low, mortgage rates are low, too. As inflation rises, the dollar loses value. That drives investors away from mortgage-backed securities (MBS), driving prices down and yields higher. When yields rise, rates become more expensive for borrowers.
Generally speaking, when the economy is strong, more people buy houses. That drives demand for mortgages. Increased demand for mortgages can cause rates to rise. The opposite is also true; less demand can lead to lower rates.