Today’s Mortgage, Refinance Rates: Nov. 2, 2022

0
21

Insider’s experts choose the best products and services to help make smart decisions with your money (here’s how). In some cases, we receive a commission from our our partners, however, our opinions are our own. Terms apply to offers listed on this page.

Mortgage rates have held steady so far this week, as the Federal Reserve gears up to announce another hike to the federal funds rate this afternoon.

Inflation and tightening Fed policy have helped push mortgage rates up to 20-year highs, with the average 30-year fixed mortgage rate now above 7%.

But rates could finally be peaking. Many experts predict that rates will start to trend down in 2023, and they may not go too much higher this year if inflation starts to show sustained signs of easing.

But that’s a big “if,” because the Fed has so far had trouble getting prices to cool. The most recent personal consumption expenditures price index, the Fed’s preferred measure of inflation, showed that prices rose 6.2% year-over-year in September — still well above its target rate of 2%.

The Fed has made it clear it’s committed to bringing down inflation, even if that means pushing the economy into a recession. If the economy enters a recession, mortgage rates would likely come down, though probably not to the historic lows we saw in 2020 and 2021.

Mortgage rates today

Mortgage type Average rate today

 

 

 

 

 

 

 

 

 

 

 

 

 

 

This information has been provided by
Zillow. See more
mortgage rates on Zillow

Mortgage refinance rates today

Mortgage type Average rate today

 

 

 

 

 

 

 

 

 

 

 

 

 

 

This information has been provided by
Zillow. See more
mortgage rates on Zillow

Mortgage calculator

Use our free mortgage calculator to see how today’s mortgage rates will affect your monthly and long-term payments.

Mortgage Calculator

$1,161
Your estimated monthly payment

  • Paying 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.

Mortgage rate projection for 2023

Mortgage rates started ticking up from historic lows in the second half of 2021 and have increased over three percentage points so far in 2022. They’ll likely remain near their current levels for the remainder of 2022.

But many forecasts expect rates to begin to fall next year. In their latest forecast, Fannie Mae researchers predicted that rates are currently peaking, and that 30-year fixed rates will trend down to 6.2% by the end of 2023.

The Mortgage Bankers Association also noted that a recession in the first half of 2023 could cause rates to fall even faster. It currently estimates that there’s a 50% likelihood that a mild recession will materialize in the next year.

Whether mortgage rates will drop in 2023 hinges on if the Federal Reserve can get inflation under control.

In the last 12 months, the Consumer Price Index rose by 8.2%. This is only a slight slowdown compared to the previous month’s numbers, which means the Fed will likely need to continue aggressively raising the federal funds rates to get prices to meaningfully come down.

As inflation slows, mortgage rates will likely start to fall as well. If the Fed acts too aggressively and engineers a recession, mortgage rates could fall further than what current forecasts expect. But rates probably won’t drop to the historic lows borrowers enjoyed throughout the past couple of years.

When will house prices come down?

Home prices are starting to decline, but we likely won’t see huge drops, even if there’s a recession.

The S&P Case-Shiller Home Price Index shows that prices are still up year-over-year, though they fell on a monthly basis in July. Fannie Mae researchers expect prices to decline 1.5% in 2023, while the MBA expects a 2.8% increase in 2023 and a 2.1% increase in 2024.

Sky high mortgage rates have pushed many hopeful buyers out of the market, slowing homebuying demand and putting downward pressure on home prices. But rates may start to drop next year, which would remove some of that pressure. The current supply of homes is also historically low, which will likely keep prices from dropping too far.

Fixed-rate vs. adjustable-rate mortgage pros and cons

Fixed-rate mortgages lock in your rate for the entire life of your loan. Adjustable-rate mortgages lock in your rate for the first few years, then your rate goes up or down periodically.

ARMs typically start with lower rates than fixed-rate mortgages, but ARM rates can go up once your initial introductory period is over. If you plan on moving or refinancing before the rate adjusts, an ARM could be a good deal. But keep in mind that a change in circumstances could prevent you from doing these things, so it’s a good idea to think about whether your budget could handle a higher monthly payment.

Fixed-rate mortgage are a good choice for borrowers who want stability, since your monthly principal and interest payments won’t change throughout the life of the loan (though your mortgage payment could increase if your taxes or insurance go up).

But in exchange for this stability, you’ll take on a higher rate. This might seem like a bad deal right now, but if rates increase further in a few years, you might be glad to have a rate locked in. And if rates trend down, you may be able to refinance to snag a lower rate 

How does an adjustable rate mortgage work?

ARMs start with an introductory period where your rate will remain fixed for a certain period of time. Once that period is up, it will begin to adjust periodically — typically once per year or once every six months.

How much your rate will change depends on the index that the ARM uses and the margin set by the lender. Lenders choose the index that their ARMs use, and this rate can trend up or down depending on current market conditions.

The margin is the amount of interest a lender charges on top of the index. You should shop around with multiple lenders to see which one offers the lowest margin.

ARMs also come with limits on how much they can change and how high they can go. For example, an ARM might be limited to a 2% increase or decrease every time it adjusts, with a maximum rate of 8%.

Should I get a HELOC? Pros and cons

If you’re looking to tap into your home’s equity, a home equity line of credit, or HELOC, might be the best way to do so right now. Unlike a cash-out refinance, you won’t have to get a whole new mortgage with a new interest rate, and you’ll likely get a better rate than you would with a home equity loan.

But HELOCs don’t always make sense. It’s important to consider the pros and cons.

HELOC pros

  • Only pay interest on what you borrow
  • Typically have lower rates than alternatives, including home equity loans, personal loans, and credit cards
  • If you have a lot of equity, you could potentially borrow more than you could get with a personal loan

HELOC cons

  • Rates are variable, meaning your monthly payments could go up
  • Taking equity out of your home can be risky if property values decline or you default on the loan
  • Minimum withdrawal amount may be more than you want to borrow

Source