Average fixed mortgage rates have increased for the second week in a row. Rates have been volatile in recent weeks, spiking in late June and then quickly dropping back down in July. The average 30-year fixed mortgage rate is now at 5.54%.
Compared to this time last year, the average 30-year fixed mortgage rate is up over two percentage points. As rates have risen this year, an increasing number of hopeful homebuyers have been forced out of the market due to a lack of affordability.
“The combination of higher rates, higher home prices, and the higher cost of everyday essentials (food, gas, etc.) have caused buyer hesitation and put a squeeze on recent mortgage purchase applications as shown by the most recent Home Purchase Index dropping to a 22-year low,” says Steve Kaminski, head of US residential lending at TD Bank. “Higher mortgage rates had already started to shut down refinance activity earlier this year, also now at a 22-year low.”
Today’s mortgage rates
Today’s refinance rates
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Use our free mortgage calculator to see how today’s interest rates will affect your monthly payments:
By clicking on “More details,” you’ll also see how much you’ll pay over the entire length of your mortgage, including how much goes toward the principal vs. interest.
Are mortgage rates going up?
Mortgage rates started ticking up from historic lows in the second half of 2021, and may continue to increase throughout 2022.
In May, the Consumer Price Index rose by 9.1% year-over-year. The Federal Reserve has been working to get inflation under control, and plans to increase the federal funds target rate four more times this year, following increases in March, May, and June.
Though not directly tied to the federal funds rate, mortgage rates are often pushed up as a result of Fed rate hikes and investor expectations around how they’ll impact the economy. As the central bank continues to tighten monetary policy to lower inflation, it’s likely that mortgage rates will remain elevated.
What do high rates mean for the housing market?
When mortgage rates go up, home shoppers’ buying power decreases, as more of their anticipated housing budget has to go toward paying interest. If rates get high enough, buyers can get priced out of the market completely, which cools demand and puts downward pressure on home price growth.
However, that doesn’t mean home prices will fall — in fact, they’re expected to rise even more this year, just at a slower pace than what we’ve seen in the past couple of years.
What is a good mortgage rate?
It can be hard to know if a lender is offering you a good rate, which is why it’s so important to get preapproved with multiple mortgage lenders and compare each offer. Apply for preapproval with at least two or three lenders.
Your rate isn’t the only thing that matters. Be sure to compare both what your monthly costs would be as well as your upfront costs, including any lender fees.
Even though mortgage rates are heavily influenced by economic factors that are out of your control, there are some things you can do to help ensure you get a good rate:
Consider fixed vs. adjustable rates. You may be able to get a lower introductory rate with an adjustable-rate mortgage, which can be good if you plan to move before the intro period ends. But a fixed rate could 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 boost 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. Picking the right one for your financial situation will help you land a good rate.