Home buyers are currently facing the highest mortgage rates in almost 13 years. Even after reaching 5%, mortgage rates continue to rise. Last week, the 30-year fixed average weekly rate was recorded at 5.27%.
It is unclear how much higher they could go. If you’re getting ready to start the home buying process, be prepared to adjust your budget as rates rise.
“If rising rates have reduced your affordability, look at what you can afford now,” says Robert Heck, Morty’s vice president of mortgages. “We’ve seen several buyers successfully commit over the last month, which can be frustrating at the moment, but helps advance their long-term homeownership goals.”
Mortgage rates today
Today’s Refinance Rates
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
- Lower the interest rate in one% 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 to rise from record lows in the second half of 2021 and are likely to continue rising through 2022.
In the last 12 months, the Consumer Price Index increased by 8.5%, the highest rate of inflation since 1981. The
has been working to rein in inflation and plans to raise the target federal funds rate five more times this year, following hikes in March and May.
Although not directly tied to the fed funds rate, mortgage rates often rise as a result of Federal Reserve rate increases. As the central bank continues to tighten monetary policy to reduce inflation, mortgage rates are likely to remain elevated.
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 though high rates slow demand, low inventory will continue to drive up prices, says Ralph DiBugnara, president of Home Qualified and senior vice president of Cardinal Financial.
“There is such a shortage that even if 50% of people stopped looking today, there would still be a huge demand,” he says. “So I think because of that demand, prices are going to go up for at least another 18 to 24 months.”
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 pre-approved with multiple
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.