Mortgage rates have been rising as economic data continues to support aggressive action from the Federal Reserve. This week, the average 30-year fixed mortgage rate rose to 5.66%, the highest it’s been since late June.
Last week, initial jobless claims decreased to 232,000 from the previous week’s 237,000 — a sign that the labor market remains strong even as the Fed works to slow the economy.
Because current economic indicators are still generally showing positive signs, it’s likely the Fed will keep making large hikes to the federal funds rate to try to cool inflation down to its target annual rate of 2%.
Mortgage rates aren’t directly affected by changes to the federal funds rate, but they often move up or down based on how investors expect the Fed’s actions to impact the broader economy. As long as the economy is doing well and the Fed continues raising its benchmark rate, it’s likely that mortgage rates will remain elevated.
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.
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 8.5%. 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:
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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.
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