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A housing market that has already priced out many hopeful buyers just got even more expensive. This week, the average 30-year fixed mortgage rate surpassed 6% for the first time since 2008, according to Freddie Mac.
Mortgage rates have increased dramatically over the past month, as hot economic data has continued to support an extra large federal funds rate hike from the Federal Reserve at its meeting next week.
With the combination of sky high mortgage rates and still elevated home prices, homebuyers are facing an increasingly unaffordable market.
“Although the increase in rates will continue to dampen demand and put downward pressure on home prices, inventory remains inadequate,” Sam Khater, chief economist at Freddie Mac, said in a press release. “This indicates that while home price declines will likely continue, they should not be large.”
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.
The current average 30-year fixed mortgage rate is 6.02%, according to Freddie Mac. This is the highest this rate has been since 2008, and the fourth week in a row it’s increased.
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.
The average 15-year fixed mortgage rate is 5.21%, an increase from the prior week, according to Freddie Mac data. The last time this rate was above 5% was in 2009.
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.
The average 5/1 adjustable mortgage rate is 4.93%, an increase 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.
Mortgage rates started ticking up from historic lows in the second half of 2021 and have increased significantly so far in 2022. More recently, rates have been relatively volatile.
In the last 12 months, the Consumer Price Index rose by 8.3%. The Federal Reserve has been working to get inflation under control, and plans to increase the federal funds target rate three more times this year, following increases in March, May, June, and July.
Though not directly tied to the federal funds rate, mortgage rates are sometimes pushed up as a result of Fed rate hikes and investor expectations of how those hikes will impact the economy.
Inflation remains elevated, but has started to slow, which is a good sign for mortgage rates and the broader economy.
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.
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