After a volatile few weeks for mortgage rates, last week remained relatively calm. The average 30-year fixed mortgage rate did increase, according to Freddie Mac, but only by 3 basis points, or 0.03 percentage points.
The Federal Reserve’s Federal Open Market Committee meets this week to discuss another hike to the federal funds rate. June’s Consumer Price Index data showed that inflation is still running hot, which led some to speculate that the Fed would hike rates by a full percentage point. But most experts are currently expecting a 0.75 percentage point increase.
How will this impact mortgage rates? Mortgages aren’t directly tied to the federal funds rate, but can be impacted by rate hikes. Steve Kaminski, head of US residential lending at TD Bank, says we may see a slight increase in response to Fed action, after which rates should stabilize or come back down.
“Many economists are calling for longer term rates to remain close or within 50 basis points of current levels, which may prolong current housing market conditions,” Kaminski says.
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Use our free mortgage calculator to see how today’s mortgage rates would impact your monthly payments. By plugging in different rates and term lengths, you’ll also understand how much you’ll pay over the entire length of your mortgage.
Click “More details” for tips on how to save money on your mortgage in the long run.
30-year fixed mortgage rates
The current average 30-year fixed mortgage rate is 5.54%, according to Freddie Mac. This is the second week in a row that this rate has increased. Last week, it was at 5.51%,
The 30-year fixed-rate mortgage is the most common type of home loan. 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 lengthy 30-year term allows you to spread out 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’ll have a higher rate than you would with shorter terms or adjustable rates.
15-year fixed mortgage rates
The average 15-year fixed mortgage rate is 4.75%, an increase from the prior week and the second consecutive week this rate has increased, according to Freddie Mac data.
If you want 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 a good fit for you. Because 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’ll 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 4.31%, a decrease from the previous week.
Adjustable rate mortgages can look very attractive to borrowers when rates are high, because the rates on these mortgages are typically lower than fixed mortgage rates. A 5/1 ARM is a 30-year mortgage. For the first five years, you’ll have a fixed rate. After that, your rate will adjust once per year. If rates are higher when your rate adjusts, you’ll have a higher monthly payment than what you started with.
If you’re considering an ARM, make sure you understand how much your rate could go up each time it adjusts and how much it could ultimately increase over the life of the loan.
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. This is in large part due to high levels of inflation and policy response to rising prices.
In the last 12 months, the Consumer Price Index rose by 9.1%. 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 of how those hikes will impact the economy. As elevated inflation remains and the central bank continues to tighten monetary policy, it’s likely that mortgage rates will remain at their current levels. However, if rate hikes slow the economy so much that it enters a recession, mortgage rates could trend down.
How do I find personalized mortgage rates?
Some mortgage lenders let you customize your mortgage rate on their websites by entering your down payment amount, zip code, and credit score. The resulting rate isn’t set in stone, but it can give you an idea of what you’ll pay.
If you’re ready to start shopping for homes, you may apply for preapproval with a lender. The lender does a hard credit pull and looks at the details of your finances to lock in a mortgage rate.