Today’s mortgage and refinance rates: October 25, 2022 | As rates go up, consider other loan options to save

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Mortgage rates have been inching up over the past few days. So far this year, the average 30-year fixed mortgage rate has increased over three percentage points, according to Freddie Mac, though the pace of increases has slowed somewhat in recent weeks.

With 30-year fixed rates now over 7% for many borrowers, those looking to save money on their mortgage might want to consider expanding the types of mortgages they’re considering.

Adjustable-rate mortgages are one way to save, since they typically have lower rates than fixed-rate mortgages. But ARMs can be risky, since your payment could increase when your introductory rate period is up. For a more stable monthly payment, borrowers might consider a shorter term, such as a 15-year fixed-rate mortgage, or a fixed-rate government-backed mortgage, such as an FHA or VA loan. Government-backed loans offer more competitive rates compared to their conventional counterparts, making them an affordable alternative — particularly for those who have lower credit scores.

Mortgage rates are likely to remain elevated throughout the rest of 2022 and into the first few months of 2023, and they could increase further. Homebuyers who are looking for affordability should shop around with multiple mortgage lenders and explore all of the loan options available to them to find the best deal.

Though buyers are currently navigating a tough environment, the silver lining is that decreased homebuying demand means that those who remain in the market have more room to get sellers to budge on price and other negotiables.

Today's mortgage rates

Today's refinance rates

Mortgage calculator

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

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 dramatically 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.

What happens to house prices in a recession?

House prices usually drop during a recession, but not always. When it does happen, it's generally because fewer people can afford to purchase homes, and the low demand forces sellers to lower their prices.

How much mortgage can I afford?

A mortgage calculator can help you determine how much you can afford to borrow. Play around with different home prices and down payment amounts to see how much your monthly payment could be, and think about how that fits in with your overall budget.

Typically, experts recommend spending no more than 28% of your gross monthly income on housing expenses. This means your entire monthly mortgage payment, including taxes and insurance, shouldn't exceed 28% of your pre-tax monthly income.

The lower your rate, the more you'll be able to borrow, so shop around and get preapproved with multiple mortgage lenders to see who can offer you the best rate. But remember not to borrow more than what your budget can comfortably handle.

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