Mortgage of the day, refinancing rate: September 19, 2022

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The Federal Reserve is likely to adopt another 75 basis point hike in the fed funds rate at its meeting this week, although there is a slim chance it could opt for an even bigger hike in the federal funds rate. 100 basis points. An increase of 100 basis points equals 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 is still slow to come down. This has helped push mortgage rates to record highs.

While high mortgage rates combined with high house prices have many wondering if they should wait for the market to cool before buying a home, buying now could be a hedge against rent inflation for those who can. afford.

“Although first-time buyers should spend about $100 more on their monthly mortgage payment than on their rent, first-time homebuyers should consider that their monthly mortgage payment is not adjusted for inflation,” said Nadia Evangelou, senior economist and director of forecasting for the National Association of Realtors, said in reaction to the latest mortgage rate data from Freddie Mac. “That means the monthly mortgage payment stays the same for the life of the loan. However, if rents increase by about 5% over the next two years, these buyers will have to pay about $100 more for their rent than their current monthly mortgage payment.

Today’s Mortgage Rates

Type of mortgage Average rate today
This information was provided by Zillow. See more mortgage rates on Zillow

Today’s Refinance Rates

Type of mortgage Average rate today
This information was provided by Zillow. See more mortgage rates on Zillow

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Use our free mortgage calculator to see how today’s mortgage rates will affect your monthly and long-term payments.

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$1,161
Your estimated monthly payment

  • pay one 25% a higher down payment would save you $8,916.08 on interest charges
  • Lower the interest rate by 1% would save you $51,562.03
  • Pay an extra fee $500 each month would reduce the term of the loan by 146 month

By plugging in different terms and interest rates, you’ll see how your monthly payment might change.

Are mortgage rates increasing?

Mortgage rates started to recover from historic lows in the second half of 2021 and have risen significantly so far in 2022. More recently, rates have been relatively volatile.

Over the past 12 months, the consumer price index has increased by 8.3%. The Federal Reserve has been struggling to keep inflation under control and plans to raise the target federal funds rate three more times this year, following increases in March, May, June and July.

Although not directly tied to the fed funds rate, mortgage rates are sometimes pushed higher due to Fed rate hikes and investors’ expectations of the impact of those hikes on the economy. .

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

What do high rates mean for the housing market?

When mortgage rates rise, the purchasing power of homebuyers decreases, as more of their projected housing budget must be spent on interest payments. If rates get high enough, buyers can be shut out of the market altogether, cooling demand and putting downward pressure on home price growth.

However, that doesn’t mean house prices will go down – in fact, they’re expected to rise even more this year, just at a slower pace than what we’ve seen over the past two years.

What is a good mortgage rate?

It can be difficult to know if a lender is offering you a good rate, which is why it’s so important to get pre-approved from several mortgage lenders and compare each offer. Apply for pre-approval from at least two or three lenders.

Your price isn’t the only thing that matters. Be sure to compare both your monthly costs and your upfront costs, including lender fees.

Although mortgage rates are heavily influenced by economic factors beyond your control, there are steps you can take to ensure you get a good rate:

  • Consider fixed rates versus adjustable rates. You may be able to get a lower introductory rate with an adjustable rate mortgage, which can be beneficial if you plan to move before the end of the introductory period. But a fixed rate might be better if you’re buying a house forever, because you don’t risk your rate going up later. Examine the rates offered by your lender and weigh your options.
  • Look at your finances. The stronger your financial situation, the lower your mortgage rate should be. Look for ways to increase your credit score or reduce your debt ratio, if necessary. Saving for a larger down payment also helps.
  • Choose the right lender. Each lender charges different mortgage rates. Choosing the right one for your financial situation will help you get a good rate.

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