Today’s mortgage, refinancing rates: September 12, 2022

Although it fell briefly below 5% in early August, the average 30-year mortgage rate returned to 5.89%, the highest since 2008, according to Freddie Mac.

Rates have risen dramatically in recent weeks as the Fed has signaled that it will continue to raise the federal funds rate until inflation drops.

Tuesday’s CPI release will provide some indication of how well the Fed’s efforts have worked. But even if price growth continues to show signs of slowing, the central bank is likely to opt for an extra large hike anyway. by 75 basis points in the meeting at the end of the month.

In remarks he made last week at the Cato Institute’s 40th Annual Monetary Conference, Fed Chairman Jerome Powell made it clear that the Fed is well aware of the risks of slowing the pace of rate hikes too soon and is committed to tightening the rate. monetary policy “until the job is done”.

But if the Fed is too aggressive, it could slow the economy down enough to trigger a recession. Despite this risk, Powell indicated that the Fed believes the pain caused by rising rates is preferable to the risk of continuing to drive up inflation, which could cause much more pain in the long run.

What does this mean for mortgage rates? Borrowers can expect rates to remain high for the foreseeable future and may even see them rise further. But when the economy starts to cool, likely in 2023, mortgage rates are expected to drop as well.

Mortgage Rates Today

Mortgage type Average rate today
This information was provided by Zillow. See more mortgage rates on Zillow

Mortgage Refinancing Rates Today

Mortgage type Average rate today
This information was provided by Zillow. See more mortgage rates on Zillow

Mortgage calculator

Use our free mortgage calculator to see how today’s interest rates will affect your monthly payments.

Mortgage calculator

Your estimated monthly payment

  • Pay a 25% a higher down payment would save you $ 8,916.08 on interest expense
  • Lower the interest rate by 1% would save you $ 51,562.03
  • By paying a supplement $ 500 each month would reduce the loan term by 146 months

By clicking on “More details”, you will also see how much you will pay for the entire term of your mortgage, including how much it goes towards principal versus interest.

Fixed mortgage rates at 30 years

The current 30-year average fixed mortgage rate is 5.89%, according to Freddie Mac. That’s an increase from last week, when it was 5.66%.

The 30-year fixed rate mortgage is the most common type of home loan. With this type of mortgage, you will pay back what you have borrowed in 30 years and your interest rate will not change over the life of the loan.

The 30-year long term allows you to 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.

Fixed 15-year mortgage rates

The average 15-year fixed mortgage rate is 5.16%, an increase from the previous week, according to data from Freddie Mac. This is the first time this rate has exceeded 5% since 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 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 have with a longer term.

5/1 Adjustable Mortgage Rates

The average adjustable mortgage rate of 5/1 is 4.64%, an increase from the previous week.

Adjustable rate mortgages can seem 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 will have a flat rate. After that, your rate will be changed once a year. If the rates are higher when your rate is changed, you will have a higher monthly rate than what you started with.

If you are considering an ARM, make sure you understand how much your rate might rise each time it adjusts and how much it might eventually rise over the life of the loan.

Will mortgage rates rise in 2022?

To help the US economy during the COVID-19 pandemic, the Federal Reserve aggressively bought assets, including mortgage-backed securities. This helped keep mortgage rates at historic lows.

However, the Fed has begun to reduce the assets it holds and is expected to raise the federal funds rate three more times in 2022, following increases in March, May, June and July.

While not directly tied to the federal funds rate, mortgage rates are sometimes pushed up due to Fed rate hikes and investor expectations of how those hikes will impact the economy.

Inflation remains high but has started to slow, which is a good sign for mortgage rates and the wider economy.

What is a fixed rate mortgage vs an adjustable rate mortgage?

Historically, adjustable mortgage rates tend to be lower than 30-year fixed rates. When mortgage rates go up, ARMs may start to look like the best deal, but it depends on your situation.

Fixed-rate mortgages lock the rate for the entire term of the loan. Variable rate mortgages lock the rate for the first few years, so the rate increases or decreases periodically.

Since adjustable rates start low, they are useful options if you plan to sell your home before the interest rate changes. For example, if you get a 7/1 ARM and want to move before the seven-year fixed rate period expires, you won’t risk paying a higher rate later.

But if you want to buy a home forever, a flat rate may still be a better option, since you won’t risk your rate going up in a few years.

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