Mortgage rate hike on January 12, 2022: what does it mean for buyers?

Jim Lane / Getty

A few major mortgage rates have gone up today. Average interest rates for 15-year and 30-year fixed mortgages have both tended to increase. We have also seen an inflation in the average rate of adjustable rate 5/1 mortgages. Although mortgage rates fluctuate, they are at an all-time low. For this reason, now is the perfect time for potential buyers to secure a fixed rate. But as always, be sure to consider your personal goals and circumstances first before buying a home, and look for a lender who can best meet your needs.

30-year fixed rate mortgages

The average interest rate for a standard 30-year fixed mortgage is 3.52%, which is an 18 basis point increase from a week ago. (One basis point equals 0.01%.) Thirty-year fixed rate mortgages are the most common loan term. A 30 year fixed rate mortgage will usually have a lower monthly payment than a 15 year mortgage, but usually a higher interest rate. You won’t be able to pay off your home that quickly, and you’ll pay more interest over time, but a 30-year fixed mortgage is a good option if you’re looking to keep your monthly payment down.

15-year fixed rate mortgages

The average rate for a 15-year fixed-rate mortgage is 2.84%, which is an increase of 22 basis points from seven days ago. Compared to a 30-year fixed mortgage, a 15-year fixed mortgage with the same loan value and the same interest rate will have a higher monthly payment. However, as long as you are able to afford the monthly payments, a 15-year loan has several advantages. These typically include the ability to get a lower interest rate, pay off your mortgage sooner, and pay less total interest over the long term.

5/1 adjustable rate mortgages

A 5/1 variable rate mortgage has an average rate of 3.54%, an addition of 19 basis points from a week ago. With an ARM mortgage, you will typically get a lower interest rate than a 30-year fixed mortgage for the first five years. But changes in the market can cause your interest rate to increase after this period, as stated in your loan terms. For borrowers who are considering selling or refinancing their home before rates change, an adjustable rate mortgage may be a good option. Otherwise, market fluctuations could dramatically increase your interest rate.

Mortgage rate trends

We use data collected by Bankrate, which is owned by the same parent company as CNET, to track rate changes over time. This table summarizes the average rates offered by lenders nationwide:

Current average mortgage interest rates

Type of loan Interest rate A week ago Change
30-year fixed rate 3.52% 3.34% +0.18
15-year fixed rate 2.84% 2.62% +0.22
Giant 30-year mortgage rate 2.73% 2.75% -0.02
30-year mortgage refinancing rate 3.54% 3.35% +0.19

Updated January 12, 2022.

How To Shop For The Best Mortgage Rate

You can get a personalized mortgage rate by connecting with your local mortgage broker or by using an online calculator. Make sure you think about your current finances and your goals when trying to find a mortgage. Things that affect the mortgage interest rate you might get include: your credit rating, down payment, loan-to-value ratio, and debt-to-income ratio. Typically, you want a higher credit score, higher down payment, lower DTI, and lower LTV to get a lower interest rate. Beyond the mortgage rate, factors such as closing costs, fees, points of call, and taxes can also be factored into the cost of your home. Be sure to talk to multiple lenders – including local and state banks, credit unions, and online lenders – and a comparator to find the best mortgage for you.

How does the term of the loan affect my mortgage?

When choosing a mortgage, remember to consider the length of the loan or the repayment schedule. The most commonly offered mortgage terms are 15 years and 30 years, although you can also find 10, 20 and 40 year mortgages. Mortgages are divided into fixed rate and variable rate mortgages. For fixed rate mortgages, the interest rates are the same throughout the life of the loan. Unlike a fixed rate mortgage, the interest rates on a variable rate mortgage are only stable for a certain period of time (most often five, seven, or 10 years). After that, the rate fluctuates annually based on the market rate.

When choosing between a fixed rate mortgage and an adjustable rate mortgage, you need to consider how long you plan to live in your home. If you plan to live in a new home for the long term, then fixed rate mortgages may be the best option. While variable rate mortgages may offer lower interest rates initially, fixed rate mortgages are more stable over the long term. If you don’t plan on keeping your new home for more than three to ten years, an adjustable rate mortgage might give you a better deal. The best loan term depends entirely on the individual’s circumstances and goals, so be sure to consider what’s important to you when choosing a mortgage.

About Scott Conley

Check Also

RBNZ ‘wouldn’t want mortgage rates to drop any further’

The Reserve Bank would not like to see mortgage rates fall further for the time …