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Mortgage rates have fallen somewhat as investors speculate that the Federal Reserve will soon slow the pace of its rate hikes. But interest rates are still significantly higher than a month ago.
Inflation and Fed policy have helped push mortgage rates higher this year. The Fed has raised federal funds rates to slow economic growth and bring inflation to its annual target of 2%. But prices have been resilient so far, slowing less than expected in August.
Fed Chair Jerome Powell has stated that the Fed monitors the latest economic data to determine the pace of future rate hikes and is wary of slowing the pace too soon. In its last three sessions, it increased the federal funds rate by 75 basis points.
But with a likely recession on the horizon, it’s possible the Fed will opt for a smaller hike at its next meeting in November. The CME FedWatch tool currently has the probability of a 50 basis point increase at 33.3%.
A smaller increase would likely be good news for mortgage rates. But if next week’s CPI shows prices are still slowly falling, the central bank is likely to stick to its dovish stance.
Mortgage rates today
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Mortgage refinancing rates today
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Use our free mortgage calculator to see how today’s interest rates will affect your monthly payments.
Your estimated monthly payment
- Pay a 25% you would save yourself a higher down payment $8,916.08 on interest charges
- interest rate reduction 1% would save you $51,562.03
- pay surcharge $500 each month would shorten the loan term by 146 Months
If you click More Details, you can also see how much you will pay over the life of your mortgage, including the amount of principal versus interest.
30 year fixed mortgage rates
According to Freddie Mac, the current average 30-year fixed-rate mortgage rate is 6.7%. This is the highest rate since 2007 and is the sixth week in a row that it has increased.
The 30-year fixed-rate mortgage is the most common form of home loan. With this type of mortgage, you pay back what you borrowed over 30 years, and your interest rate does not change over the life of the loan.
The long term of 30 years allows you to spread your payments over a long period of time, meaning you can keep your monthly payments lower and more manageable. The trade-off is that you have a higher rate than with shorter terms or adjustable rates.
15 year fixed mortgage rates
The average 15-year fixed-rate mortgage rate is 5.96%, up from the previous week, according to data from Freddie Mac.
If you want the predictability of a fixed interest rate but want to spend less interest over the life of your loan, a 15-year fixed-rate mortgage may be right for you. Because these terms are shorter and have lower interest rates than 30-year fixed-rate mortgages, you could potentially save tens of thousands of dollars in interest. However, you have a higher monthly payment than with a longer term.
5/1 Adjustable Mortgage Rates
The average 5/1 mortgage rate is 5.3%, up from the previous week.
Adjustable rate mortgages can be very attractive to borrowers when interest rates are high because interest rates on these mortgages are typically lower than interest rates on fixed-rate mortgages. A 5/1 ARM is a 30-year mortgage. You receive a fixed price for the first five years. After that, your tariff will be adjusted once a year. If the rates are higher when you adjust your rate, you’ll have a higher monthly payment than when you started.
If you’re considering an ARM, make sure you understand how much your interest rate could increase with each adjustment, and how much it could ultimately increase over the life of the loan.
Will mortgage rates rise in 2022?
To help the US economy during the COVID-19 pandemic, the Federal Reserve aggressively bought assets, including mortgage-backed securities. This helped keep mortgage rates at historic lows.
However, the Fed has started to reduce the assets it holds and is expected to raise the federal funds rate twice more in 2022 after raising it at its last five meetings.
While not directly tied to the federal funds rate, mortgage rates are sometimes pushed higher as a result of Fed rate hikes and investor expectations of how those increases will affect the economy.
Inflation remains high but has gradually slowed, which bodes well for mortgage rates and the broader economy.
What is a Fixed Rate Mortgage Compared to an Adjustable Rate Mortgage?
Historically, variable mortgage rates have tended to be lower than 30-year fixed rates. As mortgage rates rise, ARMs can start to look like the better deal — but that depends on your situation.
Fixed-rate mortgages secure your interest rate for the entire term of your loan. Adjustable rate mortgages fix your interest rate for the first few years, then your interest rate rises or falls periodically.
Because variable interest rates start out low, they’re viable options if you’re planning to sell your home before interest rates change. For example, if you get a 7/1 ARM and want to move before the end of the seven-year fixed rate period, you don’t risk paying a higher rate later.
But if you’re looking to buy a forever home, a fixed rate might still be a better fit since you don’t risk your interest rate going up in a few years.