30-year fixed mortgage rates
The interest on a 30-year fixed-rate mortgage rose last week from an average 3.05% to 3.09% —the highest since April, mortgage giant Freddie Mac reported on Thursday. One year ago, the popular loans were averaging just 2.80%.
Mortgage rates are continuing to rise "due to the trajectory of both the economy and the pandemic," says Sam Khater, Freddie Mac’s chief economist.
New COVID-19 infections are dropping, but inflation is high and could get worse — putting the Federal Reserve on a path to undo its COVID-fighting policies that have helped keep mortgage rates low.
15-year fixed mortgage rates
The average 15-year fixed mortgage rate also climbed last week, to 2.33% from 2.30%, Freddie Mac says.
With that uptick, the typical rate is now exactly where it was last year at this time.
The shorter-term mortgages are popular among refinancing homeowners. While going from a 30-year to 15-year loan may mean higher monthly payments, the lifetime interest costs will be far lower.
5-year adjustable mortgage rates
Rates on five-year adjustable-rate mortgages inched down last week, from 2.55% to 2.54%, on average. A year ago, the loans were averaging a much steeper 2.87%.
Adjustable-rate mortgages (ARMs) begin with fixed interest rates for a period of years, then can rise or fall at regular intervals.
A 5/1 ARM starts with a fixed five-year interest period and then adjusts every (one) year after that.
Will rates go down again? Not likely, experts say
"The one-two punch of rising inflation and the Fed tapering asset purchases will continue to drive mortgage rates higher, likely reaching 3.4% by December," says George Ratiu, manager of economic research for Realtor.com.
The Fed has been buying up tens of billions of dollars' worth of Treasury bonds and mortgage-backed securities each month, but policymakers are expected to announce in early November that they're pulling back on that strategy.
Basically, that means if you're still on the fence about refinancing, it's time to get off.
"Rates are higher than they were a few weeks ago. And if you’re ready to lock, now is a good time to do so," writes Tim Lucas, editor of The Mortgage Reports. "Rates are likely to keep going up from here."
Lucas points out that mortgage rates are still cheap — lower than they were before the pandemic. In January of last year, 30-year mortgages were averaging a lofty 3.72%.
How to lock in a low rate now
A recent study found almost half the homeowners who refinanced between April 2020 and April 2021 were able to cut their monthly mortgage payments by $300 or more.
If you decide you'd benefit from a refi — or if you're buying a home — be sure to gather quotes from multiple lenders. Studies from Freddie Mac and others have found that comparing five loan offers seems to be the magic number for getting the best deal on a mortgage.
The lowest rates generally go to borrowers with the strongest credit histories. So, start by reviewing your credit score, which you can easily do for free.
If your score needs work because of credit card balances and other high-interest debt that accumulated during the pandemic, you may want to consider a debt consolidation loan — to help reduce the amount of interest you pay and wipe out your debt faster.
If you’re not able to refinance, there are other ways to cut the cost of homeownership. When your home insurance comes up for renewal, take time to check quotes from several home insurers. You could find a cheaper rate that will save you hundreds of dollars a year.