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Even if interest rates fall slightly, they still affect affordability. If you are looking to buy a home soon, you can shop at several lenders and look at all the mortgage options available to save money in a high interest rate environment.
“In this environment, small changes in interest rates or terms can have a huge impact, leading many to consider a wider range of options or loan types in the hope of getting a better deal,” said Robert Heck, vice president of mortgages at Morty. “We always encourage buyers to carefully evaluate all of their options, so this environment supports sound buyer practices in a number of ways, including taking a comprehensive look at each of your individual financial situation and researching or using the mortgage market to access all available options.”
Today’s Mortgage Rates
Today’s Mortgage Refinance Rates
Use our free mortgage calculator to see how today’s mortgage rates affect your monthly and long-term payments.
By entering different interest terms and rates, you can see how your monthly payment can change.
Are Mortgage Rates Rising?
Mortgage rates started rising from historical lows in the second half of 2021 and may continue to rise throughout 2022. This is due in large part to rising inflation and policy responses to higher prices.
In the past 12 months, the consumer price index has increased by 8.3%. The Federal Reserve has been working to control inflation and plans to raise the federal funds rate five more times this year after increasing it by 0.25% at its March meeting and by 0.5% in May.
Although not directly related to the federal funds rate, mortgage rates are often raised as a result of higher Fed rates. As the central bank continues to tighten monetary policy to bring down inflation, mortgage rates are likely to remain high.
What do high rates mean for the housing market?
When mortgage rates rise, the purchasing power of homebuyers decreases because more of the projected housing budget must be allocated to paying interest. If interest rates rise enough, buyers can be driven out of the market altogether, reducing demand and putting pressure on house price growth.
However, this does not mean that house prices will fall – in fact, they are expected to rise more this year, at a slower pace than in recent years.
Even with fewer buyers in the market, those who can afford it will still compete for historically low stock. When there are more buyers than homes, home prices rise. Although conditions may ease somewhat due to higher interest rates, it is unlikely that we will see a significant drop in rates.
“While the market is trying to stabilize at higher price levels, buyer demand has gradually weakened as consumers assess what their affordability looks like,” Heck said. “However, things are very different from market to market, and the inventory situation remains bleak in many locations, which can still stimulate demand.”
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 is important to get pre-approved by many mortgage lenders and compare each offer. Apply for pre-approval from at least two or three lenders.
Your fare isn’t the only thing that matters. Be sure to compare both the monthly costs and the initial costs, including any lender fees.
Although mortgage rates are heavily influenced by economic factors beyond your control, there are a few things you can do to ensure that you get a good rate:
- Consider fixed versus adjustable rates. You may be able to get a lower introductory rate with an adjustable mortgage, which can be good if you want to move in before the introductory period ends. But a fixed rate may be better if you’re buying a forever home because you don’t risk an interest rate hike later. Look at the interest rates offered by your lender and weigh your options.
- Look at your money. The better your financial situation, the lower your mortgage rate. Find ways to improve your credit score or reduce 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. Choosing the right option for your financial situation will help you get a good interest rate.
Read the original article on Business Insider
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