Mortgage Rates on the Rise

In the past week, key mortgage rates have been on the rise, impacting both short-term and long-term borrowers. The 15-year fixed and 30-year fixed mortgage rates have both seen an uptick, as have the rates for 5/1 adjustable-rate mortgages.

This increase in mortgage rates can be attributed in part to the inflation surge experienced in 2022. To combat rising prices, the Federal Reserve has been gradually raising its federal funds rate, which influences the rates banks charge for borrowing money. By making borrowing more expensive, the Fed aims to curb consumer spending and control inflation.

During its recent meeting in July, the Fed implemented a 0.25% increase in the federal funds rate, marking the 11th hike in the current cycle. While this move could potentially affect mortgage rates, experts believe that the markets may have already factored this change in. Jacob Channel, senior economist at LendingTree, suggests that mortgage rates are likely to remain in the 6% to 7% range.

It's important to note that the Fed doesn't directly set mortgage rates, but its actions do have a significant impact. Mortgage rates are influenced by various economic factors, including inflation and employment trends. Lower inflation is generally favorable for mortgage rates, but the possibility of further Fed rate hikes in the near future could continue to put upward pressure on already elevated rates.

For prospective homebuyers, the key takeaway is to focus on what you can control. Improving your credit score and saving for a down payment can increase your chances of securing the best available mortgage rate. Additionally, comparing rates and fees from multiple lenders, while considering the annual percentage rate (APR), can help you make informed decisions about your home financing options.

As of now, the average 30-year fixed mortgage rate stands around 7.62%, reflecting an 11 basis point increase from the previous week. While this term offers lower monthly payments compared to a 15-year mortgage, it typically comes with a higher interest rate, resulting in a longer repayment period and higher overall interest costs. Choosing between the two depends on your financial goals and priorities.

Chase Gallimore is an associate broker with EXIT Realty Shoals.