Mortgage of the day, refinancing rate: September 3, 2022

Mortgage rates have risen rapidly in recent weeks as the Federal Reserve braces for another hike in the federal funds rate at its September meeting.

So far, plenty of data has shown an economy that has remained relatively warm despite Fed increases. But on Friday, the Bureau of Labor Statistics released the August jobs report, which showed more moderate growth compared to July’s report.

The Fed is assessing whether another 75 basis point hike in the fed funds rate is needed to bring inflation down to an acceptable level. It is said that he will watch the latest economic data, including labor market data, to inform his decision.

“The labor market is particularly strong, but it is clearly imbalanced, with the demand for workers far outstripping the supply of available workers,” Fed Chairman Jerome Powell said in his Aug. 26 speech in Jackson Hole.

As the Fed continues to raise rates, mortgage rates are also expected to remain elevated. But this latest jobs report is a sign that central bank actions are starting to work, which will ultimately help drive down mortgage rates.

Mortgage rates today

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

Mortgage refinance rates today

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 8.5%. 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.

Even with fewer buyers in the market, those who can afford to buy will still be competing for historically low inventory. When there are more buyers than available homes, home prices go up. So, while conditions may ease a bit due to high rates, we are unlikely to see a significant drop in prices.

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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