Mortgage rates jumped this week. The average 30-year fixed mortgage rate hit 5.89%, surpassing its June high, according to Freddie Mac. The average 15-year fixed rate rose above 5% for the first time since 2008.
Rates have risen dramatically in recent weeks as the Federal Reserve has pledged to continue to aggressively raise the federal funds rate for as long as it needs to bring inflation down to an acceptable level.
When rates are high, it becomes even more important for borrowers to shop around and compare offers from multiple lenders, to ensure that you are getting the lowest rate available to you.
“Not only are mortgage rates rising, but rate dispersion has increased, suggesting that borrowers can benefit significantly from finding a better rate,” said Sam Khater, chief economist at Freddie Mac, in a rate release this week. “Our research indicates that borrowers could save an average of $1,500 over the life of a loan by getting one additional quote and an average of about $3,000 if they get five quotes.”
Mortgage rates today
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Mortgage refinance rates today
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Use our free mortgage calculator to see how today’s mortgage rates will affect your monthly and long-term payments.
Your estimated monthly payment
- pay one 25% a higher down payment would save you $8,916.08 on interest charges
- Lower the interest rate by 1% would save you $51,562.03
- Pay an extra fee $500 each month would reduce the term of the loan by 146 month
By plugging in different terms and interest rates, you’ll see how your monthly payment might change.
Are mortgage rates increasing?
Mortgage rates started to recover from historic lows in the second half of 2021 and have risen significantly so far in 2022. More recently, rates have been relatively volatile.
Over the past 12 months, the consumer price index has increased by 8.5%. The Federal Reserve has been struggling to keep inflation under control and plans to raise the target federal funds rate three more times this year, following increases in March, May, June and July.
Although not directly tied to the fed funds rate, mortgage rates are sometimes pushed higher due to Fed rate hikes and investors’ expectations of the impact of those hikes on the economy. .
Inflation remains high, but has started to slow, which is a good sign for mortgage rates and the economy in general.
What do high rates mean for the housing market?
When mortgage rates rise, the purchasing power of homebuyers decreases, as more of their projected housing budget must be spent on interest payments. If rates get high enough, buyers can be shut out of the market altogether, cooling demand and putting downward pressure on home price growth.
However, that doesn’t mean house prices will go down – in fact, they’re expected to rise even more this year, just at a slower pace than what we’ve seen over the past two years.
Even with fewer buyers in the market, those who can afford to buy will still be competing for historically low inventory. When there are more buyers than available homes, home prices go up. So, while conditions may ease a bit due to high rates, we are unlikely to see a significant drop in prices.
What is a good mortgage rate?
It can be difficult to know if a lender is offering you a good rate, which is why it’s so important to get pre-approved from several mortgage lenders and compare each offer. Apply for pre-approval from at least two or three lenders.
Your price isn’t the only thing that matters. Be sure to compare both your monthly costs and your upfront costs, including lender fees.
Although mortgage rates are heavily influenced by economic factors beyond your control, there are steps you can take to ensure you get a good rate:
- Consider fixed rates versus adjustable rates. You may be able to get a lower introductory rate with an adjustable rate mortgage, which can be beneficial if you plan to move before the end of the introductory period. But a fixed rate might be better if you’re buying a house forever, because you don’t risk your rate going up later. Examine the rates offered by your lender and weigh your options.
- Look at your finances. The stronger your financial situation, the lower your mortgage rate should be. Look for ways to increase your credit score or reduce your debt ratio, if necessary. Saving for a larger down payment also helps.
- Choose the right lender. Each lender charges different mortgage rates. Choosing the right one for your financial situation will help you get a good rate.
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