Today’s Mortgage and Refinance Rates: May 4, 2022 | Fed set to announce another rate hike today
The Federal Reserve is expected to announce a 0.5% hike in the federal funds rate today. As part of its target to slow inflation, the central bank announced its first rate hike in March, two years after keeping the benchmark rate near zero.
Federal funds rate increases often indirectly affect mortgage interest rates. The average 30-year fixed mortgage rate has been rising sharply this year and is now hovering above 5%, as markets anticipate today’s Fed hike.
“I believe that rates above 5% will become the norm, and I don’t see any significant declines in the near future,” says Ralph DiBugnara, president of Home Qualified and senior vice president at Cardinal Financial.
Today’s Mortgage Rates
Today’s Refinance Rates
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Use our free mortgage calculator to see how today’s mortgage rates will affect your monthly and longer-term payments.
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$1,161 Your estimated monthly payment
- Paying 25% more down payment will save you $8,916.08 on interest charges
- Reducing the interest rate by 1% will save you $51,562.03
- Paying an additional $500 each month will reduce the loan term by 146 months
By adding up the different tenors and interest rates, you’ll see how your monthly payment can change.
Are mortgage rates rising?
Mortgage rates began ticking off historic lows in the second half of 2021, and are likely to rise through 2022.
In the past 12 months, the Consumer Price Index rose by 8.5%, the fastest rate of inflation since 1981. The Federal Reserve is working to get inflation under control, and plans to raise the federal funds target rate six times this year, following a 0.25% increase at its March meeting.
Although not directly tied to the federal funds rate, mortgage rates are often pushed up as a result of Fed rate hikes. As the central bank continues to tighten monetary policy to reduce inflation, it is likely that mortgage rates will remain high.
What do higher rates mean for the housing market?
When mortgage rates rise, the purchasing power of homebuyers decreases, as more of their projected housing budget goes toward paying interest. If rates become high enough, buyers can price the market outright, which cools demand and puts pressure on the rise in home prices.
However, that doesn’t mean home prices will fall—in fact, they’re expected to rise even more this year, at a slower rate than what we’ve seen in the past few years.
Dibugnara says that even though higher rates will slow demand, lower inventory will drive prices up.
“There is such a shortage that even if 50% of people stop watching today, you will still have high demand,” he says. “So I think because of that demand, you’re going to see an increase in prices for at least 18 to 24 months.”
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’s so important to be pre-approved with multiple mortgage lenders and compare each offer. Apply for pre-approval with at least two or three lenders.
Your rate isn’t the only thing that matters. Be sure to compare your monthly costs as well as your upfront costs, including any lender fees.
Even though mortgage rates are greatly influenced by economic factors beyond your control, there are some things you can do to help make sure you get a good rate:
- Consider fixed versus adjustable rates. You may be able to get a lower introductory rate with an adjustable-rate mortgage, which can be good if you plan to move before the introduction period ends. But a fixed rate may be better if you’re buying a forever home because you won’t be taking the risk of your rate going up later. Look at the rates your lender offers and weigh your options.
- Look at your finances. The stronger your financial position, the lower your mortgage rate should be. If necessary, look for ways to increase your credit score or reduce your debt-to-income ratio. Saving for a higher down payment also helps.
- Choose the right lender. Each lender charges different mortgage rates. Choosing the right one for your financial situation will help you get the best rate.
Molly Grace
mortgage reporter
Laura Grace Tarpley, CEPF
Personal Finance Review Editor
