Insider experts pick the best products and services to help you make smart decisions with your money (here’s how). In some cases, we receive a commission from our partners, however, our opinions are our own. The terms apply to the offers listed on this page.
Federal Reserve Chairman Jerome Powell is set to announce another extra-large rate hike this afternoon, and mortgage rates rise as a result.
Most investors expect the Fed to opt for a 75 basis point increase in the fed funds rate, although a higher than 100 point increase is also possible. Mortgage rates aren’t directly affected by Fed increases, but they often go up or down based on how investors think the Fed’s actions will affect the broader economy.
The Fed has been raising rates to try to rein in inflation, but so far prices have remained stubbornly high. As long as inflation remains elevated, the Fed is likely to continue to tighten monetary policy. This means that borrowers can expect high mortgage rates for the foreseeable future.
“Based on current conditions and expectations, rates will not begin to decline until there is a consensus in economic data that indicates inflation is under control and economic growth is at a manageable level,” says Scott Haymore, head of mortgage pricing and secondary markets at TD Bank. “Looking at the fed funds futures forecast, it looks like it will be in the second half of 2023.”
mortgage rates today
|type of mortgage||average rate today|
Mortgage Refinance Rates Today
|type of mortgage||average rate today|
Use our free mortgage calculator to see how current mortgage rates will affect your monthly and long-term payments.
Your estimated monthly payment
- paying a 25% a higher down payment would save you $8,916.08 on interest charges
- Reduce the interest rate on 1% I would save you $51,562.03
- Paying an additional $500 each month would reduce the length of the loan by 146 months
By entering different terms and interest rates, you’ll see how your monthly payment might change.
Are mortgage rates going up?
Mortgage rates began rising from record lows in the second half of 2021 and have risen significantly so far in 2022. More recently, rates have been relatively volatile.
In the last 12 months, the Consumer Price Index increased by 8.3%. The Federal Reserve has been working to control inflation and plans to raise the target federal funds rate three more times this year, following hikes in March, May, June and July.
Although not directly tied to the fed funds rate, mortgage rates sometimes rise as a result of Federal Reserve rate increases and investor expectations about how those increases will affect the economy.
Inflation remains high, but has started to slow, which is a good sign for mortgage rates and the broader economy.
What do high rates mean for the real estate market?
When mortgage rates rise, homebuyers’ purchasing power declines, as more of their anticipated housing budget has to go toward interest payments. If rates go high enough, buyers can be pushed out of the market altogether, cooling demand and putting downward pressure on home price growth.
However, that doesn’t mean home prices are going to fall; in fact, they’re expected to rise even higher this year, just at a slower pace than we’ve seen in the past two years.
Even with fewer buyers in the market, those who can afford to buy will continue to compete for historically low inventory. When there are more buyers than houses available, house prices go up. So while conditions may relax a bit due to high rates, we are not likely 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 with multiple mortgage lenders and compare each offer. Get pre-approved with at least two or three lenders.
Your rate is not the only thing that matters. Be sure to compare both what your monthly costs would be and your initial costs, including lender fees.
Although mortgage rates are heavily influenced by economic factors beyond your control, there are a few things you can do 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 a good thing if you plan to move before the introductory period ends. But a fixed rate might be better if you’re buying a forever home because you won’t risk your rate going up later. Look at the rates your lender offers and weigh your options.
- Look at your finances. The stronger your financial situation, the lower your mortgage rate should be. Look for ways to raise your credit score or lower your debt-to-income ratio, if necessary. Saving for a higher 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.