Today's Mortgage Rates - 05/20/2022

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Fixed mortgage rates eased slightly this week.

As reported by Freddie Mac, the average offered interest rate for a conforming 30-year fixed-rate mortgage decreased by five basis points (0.05%), slipping to 5.25%. After a steep run-up for much of the winter and spring, 30-year FRM rates have managed to level off over the last few weeks. Of late, shorter-term FRMs have settled a bit more; the average offered rate for conforming 15-year fixed rate mortgages also declined by five basis points (0.05%) to 4.43%, a second consecutive easing. Short-term interest rates continue to trend upward in response to and anticipation of forthcoming Fed moves, and the initial fixed rate for a 5/1 Hybrid ARM continued higher this week, rising by a full tenth of a percentage point to (0.10%) to 4.08%.

Financial markets continue to be buffeted by all manner of issues. Recently, concerns about higher inflation (which would tend to bring higher market rates and an even more aggressive Fed) have been tempered by concerns that economy may slow more than anticipated or even slip into recession as inflation and higher interest rates take their toll. Some poor earnings reports from major retailers this week surprised investors; in turn, money flowed out of stocks and partly into a more defensive position in bonds, lowering yields and helping fixed mortgage rates to stabilize.

The effect of higher mortgage rates and declining affordability have started to show in the latest reports on housing. Existing home sales for April dropped by 2.4%, a third consecutive decline, with the 5.61 million annualized rate of sale the lowest since January 2020 (excluding the initial three months of the pandemic). The slowing in sales has improved the availability of homes to buy; these increased to 2.2 months of supply at the current sales pace. However, additional supply did little to help reduce the pace of home prices increases; the median price of a home sold in April was 14.8% above the same month a year ago.

Existing homes sales that closed in April represent transactions that began 30 to 60 days prior. With both home prices and mortgage rates high, "It looks like more declines are imminent in the upcoming months," noted Lawrence Yun, Chief Economist of the National Association of Realtors, the provider of existing-home sales data. Between mid-March and the end of April, thirty-year fixed mortgage rates rose by nearly another full percentage point, and the housing market appears to be slowing quickly.

Mortgage rates have the potential to be slightly lower in the days ahead, but are still subject to sharp swings, as has been the case of late.

Each week in HSH's MarketTrends newsletter, we track and discuss economic conditions that affect mortgage rates and their impact on housing markets and consumers. Read the most recent edition of MarketTrends or subscribe for email delivery.

Week 30-year-Fixed 15-year-Fixed 5-year-ARM
05/19 5.250% 4.430% 4.080%
05/12 5.300% 4.480% 3.980%
05/05 5.270% 4.520% 3.960%
04/28 5.100% 4.400% 3.780%
04/21 5.110% 4.380% 3.750%
04/14 5.000% 4.170% 3.690%
04/07 4.720% 3.910% 3.560%
03/31 4.670% 3.830% 3.500%
03/24 4.420% 3.630% 3.360%
03/17 4.160% 3.390% 3.190%
03/10 3.850% 3.090% 2.970%
03/03 3.760% 3.010% 2.910%

Mortgage Choices at a Glance

Loan type/terms Fixed 30 years Fixed 15 years/
20 Years
Hybrid ARM Traditional ARM Balloon Mortgage
Rate changes
  • Never; Fully fixed for entire term
  • Never; Fully fixed for entire term
  • Usually after fixed period of 3, 5, 7 or 10 years
  • After that, annual change typical
  • Fully variable
  • Typically changing at one-year intervals
  • Some have shorter change intervals
  • Never; Fully fixed for entire term
Benefits
  • Low, stable payment
  • Usually easiest qualification
  • Stable payments
  • Builds equity faster
  • Lower total interest costs than 30-year term
  • Lower rates than fully fixed-rate mortgage
  • Can sometimes borrow larger loan amount for same income
  • Can have lowest interest rates
  • Qualification may not depend upon today's interest rate
  • Often has lower interest rate/monthly payment over balloon period than fixed rate
  • Similar to hybrid ARM
Drawbacks/Risks
  • Can have highest total interest cost over time
  • User may "buy" more rate stability than actually needed, increasing cost
  • Requires higher income to qualify
  • Less affordable monthly payment
  • Funds commited to payment cannot be used elsewhere
  • Stable payment for a number of years, then unpredictable
  • Rates can jump by as much as 6 percentage points at first adjustment
  • Payments fluctuate at each rate change
  • Unpredictable, rates can change as much as 2 percentage points at each adjustment
  • Loan fully due and payable when balloon period ends
  • Must be paid off or refinanced in unknown market conditions
Alternative strategy
  • Consider Hybrid ARM with appropriate fixed period
  • Consider 30-year term and prepaying loan to preserve cash-flow flexibility
  • Consider Fixed rate mortgage or longest possible fixed period, if loan hold period not known
  • Consider Hybrid ARM to ameliorate rate and payment risks for a given period
  • Consider Hybrid ARM to ensure continued loan availability
These may be useful for...
  • Purchasing a home
  • First-time homebuyers
  • Refinancing to improve cash flow/lower payment
  • Refinancing to lower total interest cost
  • Retiring mortgage more quickly
  • Building or rebuilding equity more quickly
  • Purchasing or refinancing when time horizon is seven years or shorter, and where borrower can handle increase in monthly payments
  • Purchasing or refinancing when interest rates are near top of cycle, and are likely to fall, or sale or refinance is anticipated within three years
  • Purchasing or refinancing when time horizon is three years or longer and home will be sold prior to end of balloon period
Consider if
  • Buying or refinancing a home and planning on owning for longer than 10 years
  • Buying second home
  • Refinancing to build equity
  • Paying off mortgage before life event (retirement, etc)
  • Buying a home and expect to move before fixed period ends, or know income will rise to offset payment risk, even in worst-case scenario
  • Buying or refinancing when income can handle frequent payment changes and worst-case scenario for rates over a four-year period
  • Buying a home and expect to move before balloon period ends, or have resources to pay off mortgage if refinance not available
When shopping, ask about
  • "Full cost" vs. "No cost" refinances, prepaying loan to shorten term if desired
  • If 20-year term makes payment too high, whether 25-year term is available
  • Interest rate caps, for first and subsequent adjustments, worst-case scenario
  • A history of the Index the loan is keyed off, margin and caps
  • Whether or not there is any built-in refinancing option when the balloon period ends
Useful tools & resources

Latest Mortgage Rate Analysis

HSH's longer-range outlook for mortgage rates, where we review our last forecast,discuss current market influences and provide our expectations for mortgage rates over the next nine weeks.

Mortgage Calculators

Mortgage rates and more

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