Mortgage rates topped 4% after the last inflation report. Experts say focus on what you can control

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Mortgage rates have rallied this week, with the average 30-year fixed rate rising to 4.14% per week after dropping below 4% last week.

The big weekly jump – 17 basis points – shows how quickly and unpredictably rates are changing in an economic environment littered with push and pull factors on lenders and borrowers. If you’re in the housing market or considering a refinance, experts advise focusing on factors you can control.

“There are definitely things you can control,” says Jennifer Beeston, senior vice president of guaranteed rate mortgages. “You can’t control the war in Ukraine, inflation, monetary policy, the stock market and 19 other things.”

Experts say several economic factors are pushing interest rates higher this year: Inflation spiked again in February and, at 7.9% year-on-year, is the highest in four decades, Thursday reported the Bureau of Labor Statistics (BLS). The economic recovery from the pandemic continues, with the BLS reporting last week that the economy added 678,000 jobs in February. The Federal Reserve is expected to start raising its benchmark short-term interest rate next week to address high inflation.

The volatility caused by Russia’s invasion of Ukraine, which has already taken a heavy human toll while causing instability in financial markets around the world, could potentially counter the general increase. Experts say this may lead to lower mortgage rates as investors seek safer assets than stocks and move into bonds, which mortgage rates follow.

“The biggest consumer disconnect is that they don’t understand that rates are a living, breathing, ever-changing situation in such volatile markets,” Beeston says.

About the latest mortgage rates

Unless otherwise noted, mortgage rate data in this story is based on mortgage rate information provided by national lenders to, which, like NextAdvisor, is owned by Red Ventures.

What drives changes in mortgage rates?

Rates have tended to rise since the start of the year, when they averaged around 3.3%. Inflation and the expectation that the Fed will start raising its benchmark rate in the near term — which will increase costs for banks and other lenders — are two key factors driving this trend, Beeston said.

More clarity on the Fed will come when it meets next week. Chairman Jerome Powell told Congress last week that he would support a quarter-percentage point hike in the benchmark, giving markets a little more clarity on what to expect, but Beeston said Russia’s invasion of Ukraine makes everything difficult to predict.

“Once we see [the Fed’s] first move, you might see a lot less volatility,” she says. “If the war in Ukraine did not continue, I would estimate that next week would even things out. But with the war in Ukraine, I think we’re going to continue to see those fluctuations.

Expert predictions: what will happen to mortgage rates in March?

Big swings like the ones we’ve seen over the past two weeks were to be expected in March, experts told us. “I feel like they’re going to go up and down,” said Linda McCoy, chair of the National Association of Mortgage Brokers’ board of directors.

Rising interest rates will continue to reduce affordability as house prices continue to rise, experts told us. That means buyers will have to be more careful to make sure they can afford the monthly payments they sign up for. “When interest rates go up, it means you can afford less housing,” said Mitria Wilson-Spotser, director of housing policy for the Consumer Federation of America. “You need to rethink what you can afford, which is a comfortable monthly payment for you.”

What Other Mortgage Industry Data Says

Rates also rallied in this week’s survey by Freddie Mac, rising nine basis points to 3.85%. Freddie Mac said he expects rates to continue to rise over the long term as the war in Ukraine contributes to more short-term volatility.

Freddie Mac is a government-sponsored entity that buys mortgages on the secondary market, and although its survey methodology and when it collects data differs from others, such as the Bankrate survey referenced in this article. Although mortgage rate averages vary, they show similar trends over time.

Historic Mortgage Rates: Today’s Rates Still Favorable

Here’s a visual overview of how current mortgage rates compare to those of the past 22 years.

Rates hovering around 4% are still quite low compared to historical figures. Yearly averages over the past two decades from the Freddie Mac survey, which tracks similar trends to the Bankrate survey used in this article, show that rates are still quite favorable compared to what they were in fairly recent memory. .

Given that rates were only recently below 3%, seeing numbers that dwarf 4% can be shocking. But rates around 4% are still pretty good if you look at the long term. They were well above 4% as recently as 2018 and 2019. Before the crash of 2008, a “good” rate was still above 5%. Current mortgage interest rates are still very good in the long term, even if they cross the psychological barrier of 4%. Today’s mortgage rates also compare favorably to interest rates on other forms of debt.

What do the latest rates mean for homebuyers?

Getting a mortgage these days can be confusing for buyers, says Beeston, but there are ways to keep it simple and straightforward. She cautions buyers against worrying too much about all the reported movements in rate averages and in the news, focusing instead on getting a rate that works for you and with which you are at ease. comfortable. Don’t try to time the market to get the best rate you think you can get. “If you think you’re going to like the fare, lock it in,” she says. “Because that’s probably going to change in 20 minutes.”

Pro tip

Remember that rates can vary slightly from lender to lender, so shop around and get different quotes to make sure you get the best rate.

Buyers should work closely with their lender to be sure what they are getting, what they are qualified for, and how rate changes will affect them. Beeston suggests talking to your lender about the rate differential for the payment you want, and that you should consider qualifying at a higher rate so you can be comfortable with how much you can spend if rates go up. Check with your lender at least every 10 days, she says. “Understand that you can’t control the market,” she says. “It’s way too volatile.”

You may also want to be wary if you’re pre-qualified for the maximum amount, as rate changes happen quickly and that could cause big swings in what a lender will actually approve for you, Beeston says. “You could qualify on Thursday and decline on Friday because rates moved an eighth [of a percentage point],” she says. “Don’t max out. Give yourself some wiggle room.

And if you’re waiting for house prices to fall because interest rates are rising, don’t hold your breath. Beeston says the factors driving up house prices are supply and demand, not mortgage rates, and that neither supply nor demand will change quickly. “Unless we suddenly have a huge supply of housing, prices will continue to rise,” she says.

What do the latest rates mean for existing owners?

While experts have said that rising rates have reduced the number of homeowners who can save money by refinancing at a lower rate, whether that makes sense entirely depends on your personal financial situation. As a general rule, if you can refinance at a rate at least 0.75% lower than your current rate, it makes sense. “If you can lower your rate, regardless of what’s happening in the market, and it will save you money, cool,” says Beeston.

Another option is a cash-out refinance, which is less based on your interest rate dropping and instead allows you to tap into some of the equity in your home — such as rising home prices — to withdraw money for other purposes. This could be a major home renovation to further increase equity or a debt consolidation. Beeston says debt consolidation is usually a good reason to refinance, especially because rising interest rates will affect not just mortgage rates, but all consumer debt, including credit cards.

If you’re considering a cash refinance to take out a relatively small amount of cash, however, Beeston recommends taking a close look at whether it’s worth doing if you’re raising the interest rate on the rest of your mortgage. If you have a mortgage of, say, $500,000 and want to do a withdrawal refi to take out $10,000, crunch the numbers to see if it will cost you more in the long run. “Make sure you do the math,” Beeston said. “Don’t just trust the lender to do the math for you.”

Whether you’re looking to refinance or buy, you can compare lenders’ offers here using this Mortgage comparison calculator. You can enter the loan amount, rate, fees, and term for each offer and see a real side-by-side comparison.

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