Mortgage rates have been falling in recent days, with the 30-year fixed rate falling significantly. At the end of July, the average 30-year fixed interest rate fell below 5% for the first time since the beginning of June.
Rates have been volatile in recent weeks as fears of an impending recession mount.
Even with lower rates, many would-be homebuyers struggle to find affordability in a still-heated housing market. If you want to buy something but are struggling with high house prices, keep an open mind and avoid the urge to take a monthly payment that squeezes your budget too tight.
“A lender can break down the numbers for you and help you with potential solutions that focus on monthly payments that fit your specific budget,” said Steve Kaminski, head of US home loans at TD bank. “You can also minimize the impact of inflation by re-evaluating your must-haves against your nice-to-haves in a home as you begin your search.”
Today’s Mortgage Rate
Today’s Refinancing Rates
Use our free mortgage calculator to see how current mortgage rates will affect your monthly and long-term payments.
Your Estimated Monthly Payment
- pay a 25% higher deposit would save you! $8,916.08 on interest charges
- Reduction of interest by 1% would you save $51,562.03
- Pay extra $500 each month would reduce the length of the loan by 146 months
By entering different maturities and interest rates, you can see how your monthly payment might change.
Will mortgage rates go up?
Mortgage rates started rising from historic lows in the second half of 2021 and have risen significantly so far in 2022. More recently, rates have been relatively volatile.
In the past 12 months, the consumer price index rose by 9.1%. The Federal Reserve has done its best to contain inflation and plans to raise the Federal Funds target three more times this year, following increases in March, May, June and July.
While not directly linked to Federal Funds rates, mortgage rates are sometimes pushed up as a result of Fed rate hikes and investor expectations about the impact of those hikes on the economy. If inflation remains high, mortgage interest rates may remain at current levels or may even rise. But as a recession becomes more likely, mortgage rates could fall.
What do high rates mean for the housing market?
When mortgage rates rise, home buyers’ purchasing power declines because a larger portion of their projected housing budget must be spent on paying interest. If rates get high enough, buyers could be priced out of the market entirely, cooling demand and putting downward pressure on home price growth.
That doesn’t mean house prices will fall, though — in fact, they’re expected to rise even more this year, just at a slower pace than what we’ve seen in recent years.
What is a good mortgage interest deduction?
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 with multiple mortgage lenders and compare each offering. Request pre-approval from at least two or three lenders.
Your rate isn’t all that matters. Be sure to compare both your monthly fees and your initial fees, including any lenders.
While mortgage rates are heavily influenced by economic factors beyond your control, there are some things you can do to make sure you get a good rate:
- Consider fixed versus adjustable rates. You may be able to get a lower introductory rate with an adjustable-rate mortgage, which can be good if you plan to move before the introductory period ends. But a flat rate may be better if you’re buying a home forever, because you don’t run the risk of your rate rising later. Look at the rates your lender offers and weigh your options.
- Look at your finances. The stronger your financial situation, the lower your mortgage interest rate should be. Look for ways to raise your credit score or lower your debt-to-income ratio, if necessary. Saving for a higher down payment also helps.
- Choose the right lender. Each lender charges different mortgage interest rates. By choosing the right one for your financial situation, you can get a good rate.