Insider’s experts choose the best products and services to help make smart decisions with your money (here’s how). In some cases, we receive a commission from our our partners, however, our opinions are our own. Terms apply to offers listed on this page.
The Federal Reserve is likely to enact another 75-basis-point hike to the federal funds rate at its meeting this week, though there’s a slight chance it could opt for an even larger, 100-basis-point hike. An increase of 100 basis points is equal to a full percentage point.
Members of the Federal Open Market Committee, the committee that determines the Fed’s monetary policy, have increasingly taken a more aggressive stance as inflation has still been slow to come down. This has helped push mortgage rates up to record highs.
While high mortgage rates combined with elevated home prices have many wondering if they should wait for the market to cool before purchasing a home, buying now could be a hedge against rent inflation for those who can afford it.
“Although first-time buyers need to spend about $100 more for their monthly mortgage payment than their rent, first-time homebuyers should consider that their monthly mortgage payment is not adjusted to inflation,” Nadia Evangelou, senior economist and director of forecasting for the National Association of Realtors, said in a reaction to the latest mortgage rate data from Freddie Mac. “This means the monthly mortgage payment remains the same during the loan period. However, if rents rise about 5% for the next couple of years, these buyers will have to pay about $100 extra for their rent than their current monthly mortgage payment.”
Use our free mortgage calculator to see how today’s mortgage rates will affect your monthly and long-term payments.
By plugging in different term lengths and interest rates, you’ll see how your monthly payment could change.
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.
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.
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:
Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by any card issuer. Read our editorial standards.
Please note: While the offers mentioned above are accurate at the time of publication, they’re subject to change at any time and may have changed, or may no longer be available.
**Enrollment required.
About Author
