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Warm economic data pushed mortgage rates back up late last week, and they’re even higher this week.
On Friday, the Bureau of Labor Statistics released its employment report for January, showing that the US economy added more jobs than expected last month. As a result, average 30-year mortgage rates rose, reaching their highest point since mid-December, according to Zillow data.
Prior to this, rates had been falling as markets braced for a potential rate cut by the Federal Reserve earlier this year. But since the labor market is still strong, Fed officials are likely to feel comfortable with a wait-and-see approach to rate cuts.
Mortgage rates are not directly affected by Fed rate changes, but investor expectations of how the Fed’s policy decisions will affect the overall economy can push mortgage rates up or down.
Once the Fed announces that it is likely to start lowering rates soon, mortgage rates should also drop. Currently, investors believe we will get a Fed cut in May or June, according to the CME FedWatch Tool. So we’ll see mortgage rates inch ahead of the meetings.
In an interview with “60 Minutes” that aired Sunday, Fed Chair Jerome Powell discussed the latest jobs report on how strong the overall economy is, and said the Fed should weigh the risks of lowering rates too soon versus too late.
“The kinds of things that make us want to act sooner are when we see weakness in the labor market or when we see inflation that’s very attractive,” Powell said, according to the interview transcript. “The kind of things that would make us want to move later are if inflation becomes more consistent, for example.”
In fact, the Fed wants to ensure that inflation comes up to the 2% target while also avoiding a recession. Powell said the Fed needs more data to make sure it’s meeting its goals, which means it could be a few more months before we get a rate cut. This means that mortgage rates are likely to remain near their current levels for a while.
Mortgage Prices Today
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Mortgage Repayment Rates Today
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Use our free mortgage calculator to see how current mortgage payments affect your monthly and long-term payments.
Your estimated monthly payment
- Payment a 25% a higher down payment can save you $8,916.08 of interest charges
- Lowering the interest rate by 1% could have saved you $51,562.03
- Pay more $500 each month can reduce the length of the loan by 146 months
By plugging in different term lengths and interest rates, you can see how your monthly payments can change.
30 Year Fixed Mortgage Rates
The average 30-year fixed mortgage rate was 6.63% last week, according to Freddie Mac. This is only six basis points lower than last week.
A 30-year fixed-rate mortgage is the most common type of home loan. With this type of mortgage, you pay back what you borrow over 30 years, and your interest rate doesn’t change for the life of the loan.
The long 30-year term allows you to spread your payments over a long period of time, meaning you can keep your monthly payments lower and more manageable. The trade-off is that you have a higher rate than you would with shorter terms or adjustable rates.
15 Year Fixed Mortgage Rates
Average 15-year mortgage rates were 5.94% last week, according to data from Freddie Mac, which is a two-basis decrease from the previous week.
If you want the predictability that comes with a fixed rate but are looking to spend less in interest over the life of your loan, a 15-year fixed-rate mortgage may be right for you. Because these terms are shorter and have lower rates than 30-year fixed-rate mortgages, you could save tens of thousands of dollars in interest. However, you will have a higher monthly payment than with a longer term.
Will Mortgage Rates Fall?
Mortgage rates are up for most of 2023. But mortgage rates are expected to decline in the coming months and years.
In the last 12 months, the Consumer Price Index increased by 3.4%. As inflation declines and the Federal Reserve is able to begin cutting the federal funds rate, mortgage rates should fall as well.
For homeowners looking to use their home equity to cover a large purchase — such as a home renovation — a home equity line of credit (HELOC) can be ‘g a good option while we wait for mortgage rates to ease. Check out some of our best HELOC lenders to start your search for the right loan for you.
A HELOC is a line of credit that allows you to borrow against the equity in your home. It’s like a credit card in that you borrow as much as you need rather than getting the full amount you borrowed in one lump sum. It also allows you to tap into the cash you have on your home without replacing your entire mortgage, like you would with a cash-out refinance.
Today’s HELOC rates are relatively low compared to other loan options, including credit cards and personal loans.
How Will Fed Rate Increases Affect Mortgages?
The Fed is aggressively raising the federal funds rate in 2022 and 2023 to slow economic growth and control inflation. As a result, mortgage rates increased.
Mortgage rates are not directly affected by changes in the federal funds rate, but they usually rise or fall ahead of the Fed’s policy moves. This is because mortgage rates change based on investor demand for mortgage-backed securities, and this demand is often affected by how investors expect Fed hikes to affect the broader economy. .
Now that the Fed has stopped hiking rates, mortgage rates are down slightly. Once the Fed starts cutting rates, which is likely to happen this year, mortgage rates should fall even further.