Mortgage rates eased slightly after yesterday’s news that inflation is still high. But rates remain high and are likely to remain so for the foreseeable future.
The Bureau of Labor Statistics released the Consumer Price Index report for August on Tuesday. The report showed a cooling of inflation, but not as much as many expected. Over the past 12 months, prices have risen 8.3%, down from 8.5% in July.
The Federal Reserve aggressively raised the federal funds rate to try to bring inflation to the target annual rate of 2%. With this latest CPI data, the Fed likely has the evidence it needs to support another 75bp hike at next week’s meeting.
The pressure from Fed rate hikes will likely keep mortgage rates high until inflation begins to drop to a more acceptable level.
Mortgage Rates Today
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Refinancing rates today
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mortgage calculator
Use our free mortgage calculator to see how current interest rates will affect your monthly payments:
mortgage calculator
$ 1,161 Your estimated monthly payment
- Paying an additional 25% down payment would save you $ 8,916.08 in interest expenses
- Lowering the interest rate by 1% would save you $ 51,562.03
- Paying an extra $ 500 each month would reduce the loan term by 146 months.
By clicking on “More details”, you will also see how much you will pay over the life of your mortgage, including how much it goes towards principal versus interest.
Are Mortgage Rates Going Up?
Mortgage rates have started to rise 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 8.3%. 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.
While not directly tied to the federal funds rate, mortgage rates sometimes rise due to Federal Reserve rate hikes and investor expectations of 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 wider economy.
What do high rates mean for the real estate market?
As mortgage rates rise, homebuyers’ purchasing power decreases as more of their projected housing budget has to be devoted to interest payments. If rates rise enough, buyers can be pushed out of the market altogether, cooling demand and putting downward pressure on house price growth.
However, this does not mean that house prices will fall; in fact, they are expected to rise even higher this year, only at a slower rate than we have seen in the past couple of years.
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 is 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 isn’t the only thing that matters. Make sure you compare both monthly costs and upfront 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 are getting a good rate:
- Consider fixed rates versus adjustable rates. You may be able to get a lower launch rate with an adjustable rate mortgage, which can be a good thing if you plan to move in before the launch period is over. But a fixed rate might be better if you are buying a home forever because you won’t risk your rate going up later on. Look at the rates offered by your lender and evaluate your options.
- Watch 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.
Molly Grace
mortgage reporter
Laura Grace Tarpley, CEPF
Personal Finance Review Editor
The origin: www.businessinsider.com
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