Could rising mortgage rates push borrowers into longer-term loans?


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A Federal Reserve official thinks 40-year mortgages might be a good idea.

While 2021 saw record high mortgage rates, 2022 was the year of rising interest charges on home loans. Rates have risen significantly since the start of the year, making home loans less affordable. These higher rates could potentially push borrowers to choose longer loan repayment terms, which means higher borrowing costs over time.

Type of mortgage

Today’s interest rate

30-year fixed mortgage


20-year fixed mortgage


15-year fixed mortgage


ARM 5/1


The data source: The National Mortgage Interest Rate Tracker from The Ascent.

30-year mortgage rates

The average 30-year mortgage rate is now 4.860%. This rate is much higher than the average rate of 3.369% that borrowers observed on January 3, 2022.

20-year mortgage rates

The average 20-year mortgage rate is 4.549% today, down from 3.101% on January 3, 2022.

15-year mortgage rates

The average 15-year mortgage rate is now 3.963%, which is a substantial increase from the average rate of 2.537% on January 3.

RMA 5/1

The average ARM rate of 5:1 is 3.846%. On January 3, 2022, this rate was only 2.943%.

Longer loan terms could make payments more affordable as rates rise – but that may not be a good idea

When mortgage rates go up, monthly payments go up. This can make it harder for borrowers to pay for their homes. In some cases, borrowers may choose loans with longer repayment terms rather than shorter loans. Although this increases the total costs, it makes each monthly payment more affordable.

Typically, 30-year loan terms are the longest available. However, the chairman of the Philadelphia Federal Reserve recently discussed the benefits of 40-year loans for some borrowers, as adding a decade of repayment time could significantly reduce monthly costs.

Unfortunately, extending the repayment for so long could mean paying significantly more interest over time. It could also cause borrowers to repay their loan principal so slowly that they end up owing more than their home is worth. And that could mean borrowers have more mortgage debt in retirement.

Prospective homeowners should be careful when opting for long repayment terms and should shop around with the best mortgage lenders for affordable loans that can be paid off in 30 years or less.

A Historic Opportunity to Save Potentially Thousands of Dollars on Your Mortgage

Chances are interest rates won’t stay at multi-decade lows much longer. That’s why it’s crucial to act today, whether you want to refinance and lower your mortgage payments or are ready to pull the trigger on buying a new home.

Ascent’s in-house mortgage expert recommends this company find a low rate – and in fact, he’s used them himself to refi (twice!). Click here to learn more and see your rate. While this does not influence our product opinions, we do receive compensation from partners whose offers appear here. We are by your side, always. See The Ascent’s full announcer disclosure here.


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