Today's Mortgage and Refinance Rates: June 19, 2023 | Rates Unlikely to Drop Soon
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Mortgage rates steadily rose throughout most of May, but they've calmed down a bit in June. Average 30-year mortgage rates inched toward 7% at the end of last month, but they've since cooled off and have been hovering around 6.50% so far this month.
The Federal Reserve met last week and decided to pause its hikes to the federal funds rate — previously, the Fed had raised rates in its last 10 meetings over 15 months. A pause to the Fed rate can be good for mortgage rates. However, the Fed is somewhat likely to raise the rate again at its July meeting, according to the CME FedWatch Tool.
If the Fed increases its rate again, we probably won't see mortgage rates drop significantly for a while.
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30-Year Fixed Mortgage Rates
The average 30-year fixed mortgage rate is currently 6.69%, according to Freddie Mac. This is a two-basis-point decrease from the week before.
The 30-year fixed-rate mortgage is the most common type of home loan. With this type of mortgage, you'll pay back what you borrowed over 30 years, and your interest rate won't change for the life of the loan.
The lengthy 30-year term allows you to spread out 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'll have a higher rate than you would with shorter terms or adjustable rates.
15-Year Fixed Mortgage Rates
The average 15-year fixed mortgage rate is 6.10% right now, according to Freddie Mac data. This is a three-basis-point increase from the previous week.
If you want the predictability that comes with a fixed rate but are looking to spend less on interest over the life of your loan, a 15-year fixed-rate mortgage might be a good fit for you. Because these terms are shorter and have lower rates than 30-year fixed-rate mortgages, you could potentially save tens of thousands of dollars in interest. However, you'll have a higher monthly payment than you would with a longer term.
Are Mortgage Rates Going Up?
Mortgage rates started ticking up from historic lows in the second half of 2021 and increased significantly in 2022. But mortgage rates are expected to trend down this year.
In the last 12 months, the Consumer Price Index rose by 4%. Inflation remains elevated, but has started to slow, which is a good sign for mortgage rates and the broader economy.
For homeowners looking to leverage their home's value to cover a big purchase — such as a home renovation — a home equity line of credit (HELOC) may be 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 lets you borrow against the equity in your home. It works similarly to a credit card in that you borrow what you need rather than getting the full amount you're borrowing in a lump sum. It also lets you tap into the money you have in your home without replacing your entire mortgage, like you'd do with a cash-out refinance.
Current HELOC rates are relatively low compared to other loan options, including credit cards and personal loans.
How Do Fed Rate Hikes Affect Mortgages?
The Fed has been increasing the federal funds rate to try to slow economic growth and get inflation under control.
Mortgage rates aren't directly impacted by changes to the federal funds rate, but they often trend up or down ahead of Fed policy moves. This is because mortgage rates change based on investor demand for mortgage-backed securities, and this demand is often impacted by how investors expect Fed hikes to affect the broader economy.
As inflation starts to come down, mortgage rates should, too. But the Fed has indicated that it's watching for sustained signs of slowing inflation, and it's not going to lower rates again any time soon — it may even increase rates again in its July meeting.