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Mortgage rates have risen more than a full percentage point in just six weeks, and they are now expected to rise above the levels that many forecasts had expected of them.
In its latest housing forecast released in August, Fannie Mae predicted that 30-year fixed mortgage rates would average 5.1% in the third quarter of 2022 – but with only two weeks left in the quarter, that rate is already to a quarterly average of 5.46%, according to data from Freddie Mac. Fannie Mae has also forecast an average rate of 4.8% in the fourth quarter of this year, but with rates already up above 6% and showing no signs of letting up, they will likely miss that forecast as well.
Freddie Mac’s forecast of 5.5% for Q3 is more in line with current expectations, but rates will likely exceed his forecast of 5.4% for Q4. The Mortgage Bankers Association forecast an average of 5.3% in Q3 and an average of 5.2% in Q4.
Prior to this recent surge, mortgage rates had fallen and hit a low of 4.99% in early August. But as economic data continued to show a strong labor market and still higher-than-expected inflation, the Federal Reserve took a more aggressive stance, promising to raise the fed funds rate until inflation shows. lasting signs of a slowdown. This caused mortgage rates to spike.
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 interest rates will affect your monthly 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 clicking on “More details”, you will also see the amount you will pay over the life of your mortgage, including the amount of principal versus interest.
30-year fixed mortgage rates
The current average 30-year fixed mortgage rate is 6.02%, according to Freddie Mac. This is the highest rate since 2008, and the fourth consecutive week it has increased.
The 30-year fixed rate mortgage is the most common type of mortgage. With this type of mortgage, you’ll pay back what you borrowed over 30 years and your interest rate won’t change for the life of the loan.
The 30-year long term allows you to spread your payments out over a long period, which means you can keep your monthly payments lower and more manageable. The tradeoff is that you’ll get a higher rate than with shorter terms or adjustable rates.
15-year fixed mortgage rates
The average 15-year fixed mortgage rate is 5.21%, an increase from the previous week, according to data from Freddie Mac. The last time this rate was above 5% was in 2009.
If you’re looking for the predictability that comes with a fixed rate, but are looking to spend less on interest over the life of your loan, a 15-year fixed rate mortgage might be right for you. Since these terms are shorter and have lower rates than 30-year fixed rate mortgages, you could potentially save tens of thousands of dollars in interest. However, you will have a higher monthly payment than you would with a longer term.
5/1 Adjustable Mortgage Rates
The average 5/1 adjustable mortgage rate is 4.93%, an increase from the previous week.
Variable rate mortgages can seem very attractive to borrowers when rates are high, as rates on these mortgages are generally lower than fixed mortgage rates. A 5/1 ARM is a 30 year mortgage. For the first five years, you will have a fixed rate. After that, your rate will adjust once a year. If rates are higher when your rate adjusts, you’ll have a higher monthly payment than you started with.
If you’re considering an ARM, make sure you understand how much your rate might increase each time it adjusts and how much it might ultimately increase over the life of the loan.
Will mortgage rates increase in 2022?
To help the US economy during the COVID-19 pandemic, the Federal Reserve has been aggressively buying assets, including mortgage-backed securities. This has helped keep mortgage rates at historically low levels.
However, the Fed has started to reduce the assets it holds and is expected to raise the federal funds rate three more times in 2022, 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 is a Fixed Rate Mortgage or an Adjustable Rate Mortgage?
Historically, adjustable mortgage rates have tended to be lower than 30-year fixed rates. When mortgage rates rise, ARMs may start to look like the best deal, but it depends on your situation.
Fixed rate mortgages lock in your rate for the life of your loan. Variable rate mortgages lock in your rate for the first few years, then your rate increases or decreases periodically.
Because adjustable rates start low, they are attractive options if you plan 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 won’t risk paying a higher rate later.
But if you want to buy a house forever, a fixed rate might still be a better fit because you don’t risk your rate going up in a few years.