Mortgage of the day, refinancing rate: July 31, 2022

Mortgage rates have fallen over the past few days as fears of an impending recession have grown.

The Federal Reserve announced last week that it was raising the federal funds rate by 75 basis points, which investors were widely expecting. The Fed raised that rate in an attempt to lower inflation, which hit a 41-year high in June.

As inflation rose, mortgage rates rose, tempering demand for home purchases. The average 30-year fixed mortgage rate is now 2.5 percentage points higher than it was a year ago.

“As we’ve seen things unfold over the past few months, the housing market remains generally healthy and demand remains at current rate levels, even though things have calmed down,” said Robert Heck, vice president of Mortgages at Morty. . “When we look at the fundamentals, things are still different from what they were during the last housing crash and current market indicators do not expect interest rates to reach a level that would push mortgage indices above 7%.”

Current Mortgage Rates

Current refinance rates

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Use our free mortgage calculator to see the impact of today’s mortgage rates on your monthly payments. By plugging in different rates and terms, you’ll also understand how much you’ll pay over the life of your mortgage.

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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

Click “More Details” for tips on how to save money on your long-term mortgage.

30-year fixed mortgage rates

The current average 30-year fixed mortgage rate is 5.3%, according to Freddie Mac. This is a decrease from last week, when it was 5.54%.

The 30-year fixed rate mortgage is the most common type of mortgage. With this type of mortgage, you’ll pay back what you borrowed over 30 years and your interest rate won’t change for the life of the loan.

The 30-year long term lets you spread your payments out over a long period, which means you can keep your monthly payments lower and more manageable. The tradeoff is that you’ll get a higher rate than with shorter terms or adjustable rates.

15-year fixed mortgage rates

The average 15-year fixed mortgage rate is 4.58%, down from the previous week, according to data from Freddie Mac.

If you’re looking for 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 right for you. Since 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 with a longer term.

5/1 Adjustable Mortgage Rates

The average 5/1 adjustable mortgage rate is 4.29%, down from the previous week.

Variable rate mortgages can seem very attractive to borrowers when rates are high, as the rates on these mortgages are usually lower than fixed mortgage rates. A 5/1 ARM is a 30 year mortgage. For the first five years, you will have a fixed rate. After that, your rate will adjust once a year. If rates are higher when your rate adjusts, you’ll have a higher monthly payment than you started with.

If you’re considering an ARM, make sure you understand how much your rate might increase each time it adjusts and how much it might ultimately increase over the life of the loan.

Are mortgage rates increasing?

Mortgage rates began to recover from historic lows in the second half of 2021 and may continue to rise throughout 2022. This is largely due to high levels of inflation and the policy response to rising mortgage rates. price.

Over the past 12 months, the consumer price index has increased by 9.1%. The Federal Reserve has been struggling to keep inflation in check 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 often pushed higher due to Fed rate hikes and investor expectations of the impact of those hikes on the economy. . As inflation remains elevated and the central bank continues to tighten monetary policy, mortgage rates are likely to remain at current levels. However, if rate hikes slow the economy so much that it enters a recession, mortgage rates could fall.

How can I find personalized mortgage rates?

Some mortgage lenders allow you to customize your mortgage rate on their websites by entering your down payment amount, zip code and credit score. The resulting rate is not fixed, but it can give you an idea of ​​what you will pay.

If you’re ready to start buying homes, you can get pre-approved from a lender. The lender makes a firm credit application and reviews your financial details to lock in a mortgage rate.

How to compare mortgage rates between lenders?

You can apply for prequalification with several lenders. A lender takes a general look at your finances and gives you an estimate of the rate you will pay.

If you’re further along in the home buying process, you have the option of seeking pre-approval from multiple lenders, not just one company. By receiving letters from more than one lender, you can compare personalized rates.

The pre-approval request requires a firm credit application. Try to apply to several lenders within a few weeks, because consolidating all your hard credits in the same amount of time will hurt your credit score less.

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