Mortgage rates have been trending down over the past few days, with 30-year fixed rates dropping significantly. At the end of July, the average 30-year fixed rate dropped below 5% for the first time since early June.
Rates have been volatile in recent weeks as fears of a looming recession grow.
Even with lower rates, many would-be homebuyers are having trouble finding affordability in a still-heated housing market. If you’re looking to buy but are struggling with high home prices, keep an open mind and avoid the urge to take on a monthly payment that stretches your budget too tight.
“A lender can break down the numbers for you and help with potential solutions that focus on monthly payments that fit within your specific budget,” says Steve Kaminski, head of US residential lending at TD bank. “You can also minimize the impact of inflation by re-evaluating your must-haves versus your nice-to-haves in a home as you begin your search.”
Today’s mortgage rates
Today’s refinance rates
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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
- Payment a 25% higher down payment would save you $8,916.08 on interest charges
- Lowering the interest rate by 1% would save you $51,562.03
- Paying an additional $500 each month would reduce the loan length by 146 months
By plugging in different term lengths and interest rates, you’ll see how your monthly payment could change.
Are mortgage rates going up?
Mortgage rates started ticking up from historic lows in the second half of 2021 and have increased significantly so far in 2022. More recently, rates have been relatively volatile.
In the last 12 months, the Consumer Price Index rose by 9.1%. The Federal Reserve has been working to get inflation under control, and plans to increase the federal funds target rate three more times this year, following increases in March, May, June, and July.
Though not directly tied to the federal funds rate, mortgage rates are sometimes pushed up as a result of Fed rate hikes and investor expectations of how those hikes will impact the economy. If inflation remains elevated, mortgage rates may stay at their current levels or even trend up. But as a recession becomes more likely, mortgage rates could fall.
What do high rates mean for the housing market?
When mortgage rates go up, home shoppers’ buying power decreases, as more of their anticipated housing budget has to go toward paying interest. If rates get high enough, buyers can get priced out of the market completely, which cools demand and puts downward pressure on home price growth.
However, that doesn’t mean home prices will fall — in fact, they’re expected to rise even more this year, just at a slower pace than what we’ve seen in the past couple of years.
What is a good mortgage rate?
It can be hard to know if a lender is offering you a good rate, which is why it’s so important to get preapproved with multiple mortgage lenders and compare each offer. Apply for preapproval with at least two or three lenders.
Your rate isn’t the only thing that matters. Be sure to compare both what your monthly costs would be as well as your upfront costs, including any lender fees.
Even though mortgage rates are heavily influenced by economic factors that are out of your control, there are some things you can do to help ensure you get a good rate:
- Consider fixed vs. 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 intro period ends. But a fixed rate could be better if you’re buying a forever home because you won’t risk your rate going up 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 rate should be. Look for ways to boost 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 rates. Picking the right one for your financial situation will help you land a good rate.