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Mortgage rates have remained relatively flat after plummeting more than a week ago. Rates could stay close to current levels for the rest of 2022 before starting to fall in the new year.
Fannie Mae’s Economic and Strategy Research Group expects 30-year fixed rates to average 6.8% in 2023 and 6.1% in 2024, according to its latest monthly forecast. The group also expects the economy to experience a “modest” recession in the first quarter of next year. This would help put downward pressure on mortgage rates.
“Higher interest rates have triggered the typical decline in residential fixed investment, which has historically led to an economic slowdown or recession,” Doug Duncan, senior vice president and chief economist at Fannie Mae, said in a news release. “From our perspective, the good news is that demographics remain supportive for housing, so the sector looks well-positioned to help pull the economy out of what we expect will be a short-lived recession.”
Current mortgage rates
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Current refinancing rates
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Use our free mortgage calculator to see how today’s mortgage rates would affect your monthly payments. By linking rates and different terms, you’ll also understand how much you’ll be paying over the entire term of your mortgage.
Your estimated monthly payment
- Paying a 25% a higher down payment would save you $8,916.08 on interest expenses
- Lower the interest rate by 1% it would save you $51,562.03
- Paying a supplement $500 each month would shorten the loan term by 146 months
Click “Learn More” for tips on how to save on your long-term mortgage.
Thirty-year fixed rate mortgage
The current 30-year average fixed mortgage rate is 6.61%, according to Freddie Mac. That’s a 47 basis point drop from the previous week.
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 in 30 years, and your interest rate won’t change for the life of the loan.
The long 30-year term lets you spread your payments over a long period of time, which means you can keep your monthly payments lower and more manageable. The trade-off is that you will get a higher rate than you would with shorter terms or adjustable rates.
15 year fixed rate mortgage
The average 15-year fixed-rate mortgage rate is 5.98%, a 40 basis point drop from the previous week, according to data from Freddie Mac.
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 may 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 will have a higher monthly payment than you would with a longer term.
Should I get a HELOC? pros and cons
If you’re looking to leverage your home’s equity, a HELOC may be the best way to go about it right now, especially considering how much home prices have risen over the past couple of years. Unlike a cash refinance, you won’t have to get a whole new mortgage with a new interest rate, and you’ll likely get a better rate than with a home equity loan.
But HELOCs don’t always make sense. It is important to consider the pros and cons.
- You only pay interest on what you borrow
- They typically have lower rates than alternatives, including home equity loans, personal loans, and credit cards
- If you have a lot of capital, you could potentially borrow more than you could with a personal loan
- Rates are variable, which means your monthly payments may increase
- Taking the equity out of your home can be risky if property values go down or you default on the loan
- The minimum withdrawal amount may be more than you wish to borrow
When will mortgage rates drop?
Mortgage rates started to climb from record lows in the second half of 2021 and have increased by more than three percentage points since January 2022. But rates have recently been on a downward trend and are likely to decline further in 2023 and 2024.
However, rates are unlikely to fall dramatically any time soon. As inflation starts to come down, mortgage rates will also drop slightly. If we experience a recession, rates may fall a little faster. But 30-year average fixed rates are likely to remain between 5% and 6% throughout 2023.
How are Fed rate hikes affecting mortgages?
The Federal Reserve raised the federal funds rate this year to try to slow economic growth and keep inflation in check. So far, inflation has slowed slightly, but is still well above the Fed’s 2% target rate.
Mortgage rates are not directly affected by changes to the federal funds rate, but often trend up or down before Fed policy moves. This is because mortgage rates change based on investor demand for mortgage-backed securities, and this demand is often influenced by how investors expect Fed hikes to affect the broader economy.
When inflation starts to fall, mortgage rates should too. But the Fed has indicated it is seeing sustained signs of slowing inflation and won’t stop raising rates anytime soon, although it may start opting for smaller hikes at upcoming meetings.