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Are We in a Recession? Here's What You Should Know About Layoffs, Debt and Investing

Are We in a Recession? Here's What You Should Know About Layoffs, Debt and Investing

This story is part of Recession Help Desk, CNET's coverage of how to make smart money moves in an uncertain economy.

What's happening

Based on the latest numbers, the US is in a period of decline -- possibly even a recession.

Why it matters

Recessions are historically marked by a period of widespread layoffs, bankruptcies, higher borrowing costs and turbulence in the stock market.

What's next

Gather facts to protect your financial position. No one can predict the future, and it's important to move calmly and deliberately.

A recession is top of mind for many Americans. But how do we know if we're in one? Technically, the country is in a recession when gross domestic product, the value of all goods and services produced during a specific period, falls during two quarters back to back. Last week's results proved this was the case: GDP dropped by 1.6% in Q1 and 0.9% in Q2, according to the advanced estimate by the Bureau of Economic Analysis.

While all signs point to a recession, in the US, this is determined by the National Bureau of Economic Research -- and it has not called a recession yet. 

But whether we can call this period a recession or not feels like a game of semantics. 

Ultimately, everyday Americans are struggling as prices continue to soar, the cost of borrowing rises and layoffs increase across the country. Here are some recent questions I answered for my So Money podcast audience about how best to prepare, save, invest and make smart money moves in these uncertain times. 

What can we expect in a recession?

It's always helpful to go back and review recession outcomes so that we can manage our expectations. While every recession varies in terms of length, severity and consequences, we tend to see more layoffs and an uptick in unemployment during economic downturns. Accessing the market for credit may also become harder and banks could be slower to lend, because they're worried about default rates. 

Read more: The Economy Is Scary. Here's What History Tells Us 

As the Federal Reserve continues to raise rates to try to clamp down on inflation, we'll see an even greater increase in borrowing costs -- for mortgages, car loans and business loans, for example. So, even if you qualify for a loan or credit card, the interest rate will be higher than it was in the prior year, making it harder for households to borrow or pay off debt. We're already seeing this in the housing market, where the average rate on a 30-year fixed mortgage was recently approaching nearly 6%, the highest level since 2009. 

During recessions, as rates go up and inflation cools, prices on goods and services fall and our personal savings rates could increase, but that all depends on the labor market and wages. We may also see an uptick in entrepreneurship, as we saw in 2009 with the Great Recession, as the newly unemployed often seek ways to turn a small business idea into reality.

Will layoffs become more common?

With the unemployment rate sitting at 3.6%, the job market may appear to be, at least right now, the only stable part of the economy. But that's likely to be temporary, as companies battling with the current financial headwinds -- including inflation, rising interest rates and weakening consumer demand -- have already begun to announce layoffs. According to Layoffs.fyi, a website that tracks job losses at tech startups, there were close to 37,000 layoffs from startups in the second quarter of 2022. This week, Shopify announced reducing its workforce by about 10% or roughly 1,000 layoffs. CEO Tobi Lutke said the e-commerce company's pandemic-driven growth plans "didn't pay off."

In the Great Recession, unemployment peaked at 10%, and it took an average of eight to nine months for those out of work to secure a new job. So now could be the time to review your emergency fund if you think there's a shortfall. If you won't be able to cover a minimum of six to nine months' worth of expenses, which is hard for most people, see if you can accelerate savings by cutting back on spending or generating extra money. It's also a good time to make sure your resume is up to date and to establish contact with influential individuals in your professional and personal network. If you are laid off, make sure to apply for unemployment benefits right away and secure your health insurance. 

If you're self-employed and worried about a possible downturn in your industry or a loss of clients, explore new revenue streams. Aim to bulk up your cash reserves as well. Again, if previous recessions taught us anything, it's that having cash unlocks choices and leads to more control in a challenging time.

Will interest rates on my loans and debts go up?

As the Federal Reserve continues to raise interest rates to try to curb inflation, adjustable interest rates are set to increase -- ratcheting up the APRs of credit cards and loans, and making monthly payments more expensive. Ask your lenders and card issuers about low-interest credit options. See if you can refinance or consolidate debts to a single fixed-rate loan.

In past recessions, some financial institutions were hesitant to lend as often as they did in "normal" times. This can be troubling if your business relies on credit to expand, or if you need a mortgage to buy a house. It's time to pay close attention to your credit score, which is a huge factor in a bank's decision. The higher your score, the better your chances of qualifying and getting the best rates. 

Should I stop investing in my 401(k)?

With stocks in a downward spiral, many want to know how a recession could impact their long-term investments. Should you stop investing? The short answer is no. At least, not if you can help it. Avoid panicking and cashing out just because you can't stomach the volatility or watch the down arrows during a bear market. 

My advice is to avoid making knee-jerk reactions. This may be a good time to review your investments to be sure that you're well-diversified. If you suddenly experience a change in your appetite for risk for whatever reason, talk it through with a financial expert to determine if your portfolio needs adjusting. Some online robo-advisor platforms offer client services and can provide guidance. 

Historically, it pays to stick with the market. Investors who cashed out their 401(k)s in the Great Recession missed out on a rebound. Despite the recent downtick, the S&P 500 has risen nearly 150% since its lows of 2009, adjusted for inflation.

The one caveat is if you desperately need the money you have in the stock market to pay for an emergency expense like a medical bill, and there's no other way to afford it. In that case, you may want to look into 401(k) loan options. If you decide to borrow against your retirement account, commit to paying it back as soon as possible.

Should I wait to buy a home?

With mortgage rates on the rise and housing prices not cooling nearly fast enough, owning could be more expensive than renting right now. A report from the John Burns Real Estate Consulting firm looked at the cost to own versus renting across the US in April and found that owning costs $839 a month more than renting. That's nearly $200 greater than at any point since the year 2000.

Fixed rates on 30-year mortgages have practically doubled since last spring, which has helped slow down offers and cool housing prices -- but competition among buyers is still stiff due to historically low inventory. All-cash offers and bidding wars continue in plenty of markets. If you've been shopping for a home in recent months or the past year to no avail, you may feel exhausted and defeated.

As I stated in my newsletter: Don't be hard on yourself. You're not doing anything wrong if you have yet to offer the top bid. While it's true that a fixed-rate mortgage can offer you more predictability and budget stability, as long as inflation continues to outpace wages, there could be some bright sides to renting right now. For one, you're not buying a home in a bubble market that some economists are saying is soon to burst. If you have to unload the home in a year or two -- during a possible recession -- you may risk selling at a loss.

Secondly, renting allows you to hold onto the cash you would have spent on a down payment and closing costs, and will help you stay more liquid during a time of great uncertainty. This allows you to pivot more quickly and secure your finances in a downturn. Remember: Cash is power.

Read more: Should You Buy a Home in 2022 or Wait? 3 Factors to Consider

My final note is that it's important to remember that recessions are a normal part of the economic cycle. Long-term financial plans will always experience some declining periods. Since World War II, the US has had about a dozen recessions and they typically end after a year or sooner. By contrast (and to give you some better news), periods of expansion and growth are more frequent and longer lasting. 

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Home Price Growth Slows for Second Month in a Row. Here's What Home Buyers Should Know

Home Price Growth Slows for Second Month in a Row. Here's What Home Buyers Should Know

Home price growth slowed again in May, a sign that the US housing market may be starting to cool off. 

This marks the second straight month that home price growth has slowed in response to economic pressures like rising interest rates and inflation. Price growth was 19.7% in May, down slightly from April's 20.6% increase, according to the S&P CoreLogic Case-Shiller National Home Price Index, a leading measure of US home prices

"Housing data for May 2022 continued strong, as price gains decelerated slightly from very high levels," said Craig Lazarra, managing director at S&P DJI, in a release. "Despite this deceleration, growth rates are still extremely robust."

A related composite, which measures real estate values in the top 20 cities in the US, rose 20.5%, down from 21.2% in April, with all cities experiencing double-digit price increases. Four of the 20 cities saw bigger price increases year over year in May 2022 than in April.

Tampa, Miami and Dallas saw the highest year-over-year gains among the 20 cities in May. Tampa saw price growth of 36.1%, with Miami seeing a 34% increase and Dallas experiencing a 30.8% growth rate year over year. Overall, price growth remains the strongest in the South and Southeast, with both regions seeing gains of 30.7% year over year. Still, as the Federal Reserve continues to raise interest rates, the slight deceleration in national growth shows that the housing market may finally be starting to slowly cool off. 

"Mortgage financing has become more expensive as the Federal Reserve ratchets up interest rates," said Lazarra. "Accordingly, a more-challenging macroeconomic environment may not support extraordinary home price growth for much longer."

It's important to understand what's going on the housing market before deciding if now is the right time to buy a home.

Mortgage rates have been rapidly climbing since the beginning of 2022, and currently sit at 5.70% for a 30-year fixed-rate mortgage. While still low, that's a sharp increase from the average 3% rates we started the year with. Mortgage rates have gone up indirectly as a result of the Federal Reserve raising the federal funds rates several times this year to counteract record-breaking high inflation. Another rate hike is expected Wednesday.

As rates climb, it becomes more expensive to buy a home. This drives down home competition and may price some buyers out of the market. As buying demand decreases, home price increases typically slow or decline.

While home prices are still high, if you're shopping for a home, you may have access to more home inventory and face less competition. With the Fed expected to raise rates again this year, you could also lock in a lower interest rate now, potentially saving you tens of thousands in interest over the lifetime of your home loan.

Ultimately, buying a home is a personal decision and will depend on a variety of factors. Check out our Should You Buy a Home in 2022 guide to learn more.

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Inflation, Interest Rates and Jobs: How Today's Economy Compares to Recessions of the Past

Inflation, Interest Rates and Jobs: How Today's Economy Compares to Recessions of the Past

This story is part of Recession Help Desk, CNET's coverage of how to make smart money moves in an uncertain economy.

What's happening

There's still debate about whether the US economy is officially headed into a recession, but the economic downturn is causing widespread stress.

Why it matters

Periods of financial volatility and market decline can drive people to panic and make costly mistakes with their money.

What's next

Examining what's happening now -- and comparing it with the past -- can help investors and consumers decide what to do next.

Facing the aftershocks of a rough economy in the first half of 2022, with sky-high inflation, rising mortgage rates, soaring gas prices and a bear market for stocks, leading indicators of a recession have moderated slightly in the past month. That could mean the economic downturn won't be as long or brutal as expected. 

Still, the majority of Americans are feeling the sting of rising prices and anxiety over jobs. The country has experienced two consecutive quarters of economic slowdown -- the barometer for measuring a recession -- even though the National Bureau of Economic Research hasn't made the "official" recession call.  

At a time like this, we should consider what happens in a recession, look at the data to determine whether we're in one and try to maintain some historical perspective. It's also worth pointing out that down periods are temporary and that, over time, both the stock market and the US economy bounce back. 

I don't mean to minimize the gravity and hardship of the times. But it can be useful to review how the economy has behaved in the past to avoid irrational or impulsive money moves. For this, we can largely blame recency bias, our inclination to view our latest experiences as the most valid. It's what led many to flee the stock market in 2008 when the S&P 500 crashed, thereby locking in losses and missing out on the subsequent bull market. 

"It's our human tendency to project the immediate past into the future indefinitely," said Daniel Crosby, chief behavioral officer at Orion Advisor Solutions and author of The Laws of Wealth. "It's a time-saving shortcut that works most of the time in most contexts but can be woefully misapplied in markets that tend to be cyclical," Crosby told me via email. 

Before you make a knee-jerk reaction to your portfolio, give up on a home purchase or lose it over job insecurity, consider these chart-based analyses from the last three decades. We hope this data-driven overview will offer a broader context and some impetus for making the most of your money today.

What do we know about inflation? 

Historical inflation rate by year

Macrotrends.net

Current conditions: The US is experiencing the highest rate of inflation in decades, driven by global supply chain disruptions, the injection of federal stimulus dollars and a surge in consumer spending. In real dollars, the 8.5% rise in consumer prices over the past year is adding about $400 more per month to household budgets. 

The context: Policymakers consider 2% per year to be a "normal" inflation target. The country's still experiencing over four times that figure. The 9.1% annual rate in July was the largest jump in inflation since 1980 when the inflation rate hit 13.5% following the prior decade's oil crisis and high government spending on defense, social services, health care, education and pensions. Back then, the Federal Reserve increased rates to stabilize prices and, by the mid-1980s, inflation fell to below 5%.

The upside: As overall inflation rates rise, the silver lining might be increased rates of return on personal savings. Bank accounts are starting to offer more attractive yields, while I bonds -- federally backed accounts that more or less track inflation -- are attracting savers, too. 

What's happening with mortgage rates? 

30-year fixed-rate mortgage averages in the US

Current conditions: As the Federal Reserve continues its rate-hike campaign to cool spending and try to tame inflation, the rate on a 30-year fixed mortgage has grown significantly. In June, the average rate jumped annually by nearly 3 percentage points to almost 6%. In real dollars, that means that after a 20% down payment on a new home (let's use the average sale price of $429,000), a buyer would roughly need an extra $7,300 a year to afford the mortgage. Since then, rates have cooled a bit, even dipping back down below 5%. What happens next with rates depends on where inflation goes from here.

The context: Three years ago, homebuyers faced similar borrowing costs and, at the time, rates were characterized as "historically low." And if we think borrowing money is expensive today, let's not forget the early 1980s when the Federal Reserve jacked up rates to never-before-seen levels due to hyperinflation. The average rate on a 30-year fixed-rate mortgage in 1981 topped 16%. 

The upside: For homebuyers, a potential benefit to rising rates is downward pressure on home prices, which could cause the housing market to cool slightly. As the cost to borrow continues to increase with mortgages becoming more expensive, homes could experience fewer offers and prices would slow in pace. In fact, nearly one in five sellers dropped their asking price during late April through late May, according to Redfin. 

On the flip side, less homebuyers mean more renters. Rent prices have skyrocketed, and housing activists are asking the White House to take action on what they call a "national emergency."

What about the stock market? 

Dow Jones Industrial Average stock market index for the past 30 years

Macrotrends.net

Current conditions: Year-to-date, the Dow Jones Industrial Average -- a composite of 30 of the most well-known US stocks such as Apple, Microsoft and Coca-Cola -- is about 8.5% below where it started in January. Relative to the broader market, technology stocks are down much more. The Nasdaq is off almost 19% since the start of the year. 

The benchmark S&P 500 stock index hit lows in June that marked a more than 20% drop from January, which brought us officially into a bear market. Since then, it's bounced back up a little, but some experts warn that a current bear market rally is at odds with expected earnings and we could see even lower stock prices in the near future.

The context: Stock price losses in 2022 are not nearly as swift and steep as what we saw in March 2020, when panic over the pandemic drove the DJIA down by 26% in roughly four trading days. The market reversed course the following month and began a bull run lasting more than two years, as the lockdown drove massive consumption of products and services tied to software, health care, food and natural gas. 

Prior to that, in 2008 and 2009, a deep and pervasive crisis in housing and financial services sank the Dow by nearly 55% from its 2007 high. But by fall 2009, it was off to one of its longest winning streaks in financial history. 

The upside: Given the cyclical nature of the stock market, now is not the time to jump ship.* "Times that are down, you at least want to hold and/or think about buying," said Adam Seessel, author of Where the Money Is. "Over the last 100 years, American stocks have been the surest way to grow wealthy slowly over time," he told me during a recent So Money podcast.

*One caveat: If you're closer to or living in retirement and your portfolio has taken a sizable hit, it may be worth talking to a professional and reviewing your selection of funds to ensure that you're not taking on too much risk. Target-date funds, a popular investment vehicle in many retirement accounts that auto-adjust for risk as you age, may be too risky for pre- or early retirees. 

What does unemployment tell us? 

US unemployment rates

Current conditions: The July jobs report shows the unemployment rate holding steady, slightly dropping to 3.5%. The Great Resignation of 2021, where millions of workers quit their jobs over burnout, as well as unsatisfactory wages and benefits, left employers scrambling to fill positions. However, that could be changing as economic challenges deepen: More job losses are likely on the horizon, and an increasing number of workers are concerned with job security. 

The context: The rebound in theunemployment rate is an economic hallmark of the past two years. But the ongoing interest rate hike may weigh on corporate profits, leading to more layoffs and hiring freezes. For context, during the Great Recession, in a two-year span from late 2007 to 2009, the unemployment rate rose sharply from about 5% to 10%. 

Today, the tech sector is one to watch. After benefiting from rapid growth led by consumer demand in the pandemic, companies like Google and Facebook may be in for a "correction." Layoffs.fyi, a website that tracks downsizing at tech startups, logged close to 37,000 layoffs in Q2, more than triple from the same period last year. 

The upside: If you're worried about losing your job because your employer may be more vulnerable in a recession, document your wins so that when review season arrives, you're ready to walk your manager through your top-performing moments. Offer strategies for how to weather a potential slowdown. All the while, review your reserves to see how far you can stretch savings in case you're out of work. Keep in mind that in the previous recession, it took an average of eight to nine months for unemployed Americans to secure new jobs.

§

What's happening

Home prices overall are up by 37% since March 2020.

Why it matters

Surging home prices and higher interest rates make monthly mortgage payments less affordable.

What's next

Rising mortgage rates will make borrowing money more expensive, which will lessen competition to buy homes and eventually flatten prices.

Home prices continued to skyrocket in March as buyers tried to stay ahead of rising mortgage rates. 

Prices increased by 20.6% this March compared to last year, according to the S&P CoreLogic Case-Shiller Indices, the leading measures of US home prices. This was the highest year-over-year increase in March for home prices in more than 35 years of data. Seven in 10 homes sold for more than their asking price, according to CoreLogic. 

Out of the 20 cities tracked by the 20-city composite index, Tampa, Phoenix and Miami saw the highest year-over-year gains in March. Tampa saw the greatest increase, with an almost 35% increase in home prices year-over-year. All 20 cities experienced double-digit price growth for the year ending in March.

The strongest price growth was seen in the south and southeast, with both regions posting almost 30% gains in March. Seventeen of the 20 metro areas also saw acceleration in their annual gains since February. 

"Those of us who have been anticipating a deceleration in the growth rate of US home prices will have to wait at least a month longer," said Craig Lazzara, managing director at S&P DJI, in the release. "The strength of the Composite indices suggests very broad strength in the housing market, which we continue to observe."

Since the start of the pandemic in March 2020, home prices overall are up by 37%. The current surge in home prices is a result of tight competition between buyers in a low-inventory market as they attempt to lock in lower mortgage rates before rates jump even higher throughout the year, as experts predict they will.

If you're considering buying a new home -- or are actively in the market -- the news isn't all bad. Interest rates are at their highest point in more than 40 years, and one potential benefit of that may, eventually, be downward pressure on home prices. As it becomes increasingly expensive to borrow money, fewer people will seek to do so, and homes for sale may receive fewer offers leading to, eventually, lower prices. In fact, nearly one in five sellers lowered their asking price during a four-week period in May and April, according to Redfin.

"Mortgages are becoming more expensive as the Federal Reserve has begun to ratchet up interest rates, suggesting that the macroeconomic environment may not support extraordinary home price growth for much longer," said Lazzara. "Although one can safely predict that price gains will begin to decelerate, the timing of the deceleration is a more difficult call."

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Mortgage Interest Rates for Sept. 1, 2022: Rates Climb

Mortgage Interest Rates for Sept. 1, 2022: Rates Climb

Some important mortgage rates increased today. The average 15-year fixed and 30-year fixed mortgage rates both grew. For variable rates, the 5/1 adjustable-rate mortgage also floated higher.

Though mortgage rates have been rather consistently going up since the start of this year, what happens next depends on whether inflation continues to climb or begins to retreat. Interest rates are dynamic and unpredictable -- at least on a daily or weekly basis -- and they respond to a wide variety of economic factors. Right now, they're particularly sensitive to inflation and the prospect of a US recession. With so much uncertainty in the market, if you're looking to buy a home, trying to time the market may not play to your favor. If inflation rises and rates climb, this could translate to higher interest rates and steeper monthly mortgage payments. For this reason, you may have better luck locking in a lower mortgage interest rate sooner rather than later. No matter when you decide to shop for a home, it's always a good idea to seek out multiple lenders to compare rates and fees to find the best mortgage for your specific situation.

30-year fixed-rate mortgages

The average 30-year fixed mortgage interest rate is 5.95%, which is an increase of 3 basis points compared to one week ago. (A basis point is equivalent to 0.01%.) The most common loan term is a 30-year fixed mortgage. A 30-year fixed rate mortgage will usually have a smaller monthly payment than a 15-year one -- but usually a higher interest rate. You won't be able to pay off your house as quickly and you'll pay more interest over time, but a 30-year fixed mortgage is a good option if you're looking to minimize your monthly payment.

15-year fixed-rate mortgages

The average rate for a 15-year, fixed mortgage is 5.19%, which is an increase of 11 basis points from the same time last week. Compared to a 30-year fixed mortgage, a 15-year fixed mortgage with the same loan value and interest rate will have a higher monthly payment. But a 15-year loan will usually be the better deal, if you're able to afford the monthly payments. These include typically being able to get a lower interest rate, paying off your mortgage sooner, and paying less total interest in the long run.

5/1 adjustable-rate mortgages

A 5/1 ARM has an average rate of 4.42%, a climb of 9 basis points compared to a week ago. For the first five years, you'll usually get a lower interest rate with a 5/1 adjustable-rate mortgage compared to a 30-year fixed mortgage. But you could end up paying more after that time, depending on the terms of your loan and how the rate adjusts with the market rate. If you plan to sell or refinance your house before the rate changes, an adjustable-rate mortgage could make sense for you. If not, shifts in the market could significantly increase your interest rate.

Mortgage rate trends

Though mortgage rates were historically low at the beginning of 2022, they have been rising somewhat steadily since then. The Federal Reserve recently raised interest rates by another 0.75 percentage points in an attempt to curb record-high inflation. The Fed has raised rates a total of four times this year, but inflation still remains high. As a general rule, when inflation is low, mortgage rates tend to be lower. When inflation is high, rates tend to be higher.

Though the Fed does not directly set mortgage rates, the central bank's policy actions influence how much you pay to finance your home loan. If you're looking to buy a house in 2022, keep in mind that the Fed has signaled it will continue to raise rates, and mortgage rates could increase as the year goes on. Whether rates follow their upward projection or begin to level out hinges on if inflation actually slows.

We use data collected by Bankrate, which is owned by the same parent company as CNET, to track changes in these daily rates. This table summarizes the average rates offered by lenders across the country:

Current average mortgage interest rates

Loan type	Interest rate	A week ago	Change
30-year fixed rate	5.95%	5.92%	+0.03
15-year fixed rate	5.19%	5.08%	+0.11
30-year jumbo mortgage rate	5.94%	5.93%	+0.01
30-year mortgage refinance rate	5.92%	5.85%	+0.07

Updated on Sept. 1, 2022.

How to find personalized mortgage rates

When you are ready to apply for a loan, you can reach out to a local mortgage broker or search online. When researching home mortgage rates, take into account your goals and current financial situation. A range of factors -- including your down payment, credit score, loan-to-value ratio and debt-to-income ratio -- will all affect your mortgage interest rate. Generally, you want a higher credit score, a larger down payment, a lower DTI and a lower LTV to get a lower interest rate. Apart from the mortgage rate, additional costs including closing costs, fees, discount points and taxes might also impact the cost of your home. Be sure to comparison shop with multiple lenders -- including credit unions and online lenders in addition to local and national banks -- in order to get a mortgage that's the right fit for you.

What's the best loan term?

One important thing to consider when choosing a mortgage is the loan term, or payment schedule. The most common mortgage terms are 15 years and 30 years, although 10-, 20- and 40-year mortgages also exist. Mortgages are further divided into fixed-rate and adjustable-rate mortgages. For fixed-rate mortgages, interest rates are set for the life of the loan. Unlike a fixed-rate mortgage, the interest rates for an adjustable-rate mortgage are only set for a certain amount of time (commonly five, seven or 10 years). After that, the rate adjusts annually based on the current interest rate in the market.

One thing to think about when deciding between a fixed-rate and adjustable-rate mortgage is how long you plan on staying in your house. Fixed-rate mortgages might be a better fit if you plan on staying in a home for quite some time. Fixed-rate mortgages offer greater stability over time in comparison to adjustable-rate mortgages, but adjustable-rate mortgages might offer lower interest rates upfront. If you aren't planning to keep your new house for more than three to 10 years, though, an adjustable-rate mortgage might give you a better deal. The best loan term is entirely dependent on your personal situation and goals, so be sure to think about what's important to you when choosing a mortgage.

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Mortgage Interest Rates Today for Aug. 17, 2022: 30-Year Fixed Rate Eases

Mortgage Interest Rates Today for Aug. 17, 2022: 30-Year Fixed Rate Eases

Today rates followed a split path. While 15-year fixed mortgage rates saw an increase along with 5/1 adjustable-rate mortgages, interest rates on 30-year fixed-rate mortgages sank a bit. 

Though mortgage rates have been rather consistently going up since the start of this year, what happens next depends on whether inflation continues to climb or begins to retreat. Interest rates are dynamic and unpredictable -- at least on a daily or weekly basis -- and they respond to a wide variety of economic factors. Right now, they're particularly sensitive to inflation and the prospect of a US recession. With so much uncertainty in the market, if you're looking to buy a home, trying to time the market may not play to your favor. If inflation rises and rates climb, this could translate to higher interest rates and steeper monthly mortgage payments. For this reason, you may have better luck locking in a lower mortgage interest rate sooner rather than later. No matter when you decide to shop for a home, it's always a good idea to seek out multiple lenders to compare rates and fees to find the best mortgage for your specific situation.

30-year fixed-rate mortgages

The average 30-year fixed mortgage interest rate is 5.54%, which is a decrease of 3 basis points from one week ago. (A basis point is equivalent to 0.01%.) Thirty-year fixed mortgages are the most frequently used loan term. A 30-year fixed rate mortgage will usually have a lower monthly payment than a 15-year one -- but often a higher interest rate. Although you'll pay more interest over time -- you're paying off your loan over a longer timeframe -- if you're looking for a lower monthly payment, a 30-year fixed mortgage may be a good option.

15-year fixed-rate mortgages

The average rate for a 15-year, fixed mortgage is 4.89%, which is an increase of 2 basis points from seven days ago. Compared to a 30-year fixed mortgage, a 15-year fixed mortgage with the same loan value and interest rate will have a larger monthly payment. But a 15-year loan will usually be the better deal, as long as you can afford the monthly payments. You'll most likely get a lower interest rate, and you'll pay less interest in total because you're paying off your mortgage much quicker.

5/1 adjustable-rate mortgages

A 5/1 adjustable-rate mortgage has an average rate of 4.21%, an increase of 2 basis points from the same time last week. You'll typically get a lower interest rate (compared to a 30-year fixed mortgage) with a 5/1 adjustable-rate mortgage in the first five years of the mortgage. But since the rate changes with the market rate, you might end up paying more after that time, as described in the terms of your loan. Because of this, an ARM could be a good option if you plan to sell or refinance your house before the rate changes. If not, shifts in the market may significantly increase your interest rate.

Mortgage rate trends

Though mortgage rates were historically low at the beginning of 2022, they have been increasing somewhat steadily since then. The Federal Reserve recently raised interest rates by another 0.75 percentage points in an attempt to curb record-high inflation. The Fed has raised rates a total of four times this year, but inflation still remains high. As a general rule, when inflation is low, mortgage rates tend to be lower. When inflation is high, rates tend to be higher.

Though the Fed does not directly set mortgage rates, the central bank's policy actions influence how much you pay to finance your home loan. If you're looking to buy a house in 2022, keep in mind that the Fed has signaled it will continue to raise rates, and mortgage rates could increase as the year goes on. Whether rates follow their upward projection or begin to level out hinges on if inflation actually slows.

We use data collected by Bankrate, which is owned by the same parent company as CNET, to track rate changes over time. This table summarizes the average rates offered by lenders across the country:

Current average mortgage interest rates

Loan type	Interest rate	A week ago	Change
30-year fixed rate	5.54%	5.57%	-0.03
15-year fixed rate	4.89%	4.87%	+0.02
30-year jumbo mortgage rate	5.53%	5.56%	-0.03
30-year mortgage refinance rate	5.50%	5.53%	-0.03

Updated on Aug. 17, 2022.

How to find personalized mortgage rates

You can get a personalized mortgage rate by reaching out to your local mortgage broker or using an online calculator. When researching home mortgage rates, consider your goals and current financial situation. Specific mortgage rates will vary based on factors including credit score, down payment, debt-to-income ratio and loan-to-value ratio. Generally, you want a good credit score, a larger down payment, a lower DTI and a lower LTV to get a lower interest rate. The interest rate isn't the only factor that affects the cost of your home — be sure to also consider additional factors such as fees, closing costs, taxes and discount points. Make sure you talk to multiple lenders -- like local and national banks, credit unions and online lenders -- and comparison shop to find the best loan for you.

What is a good loan term?

One important thing to consider when choosing a mortgage is the loan term, or payment schedule. The most common mortgage terms are 15 years and 30 years, although 10-, 20- and 40-year mortgages also exist. Mortgages are further divided into fixed-rate and adjustable-rate mortgages. The interest rates in a fixed-rate mortgage are fixed for the duration of the loan. Unlike a fixed-rate mortgage, the interest rates for an adjustable-rate mortgage are only stable for a certain amount of time (commonly five, seven or 10 years). After that, the rate fluctuates annually based on the market interest rate.

One important factor to take into consideration when choosing between a fixed-rate and adjustable-rate mortgage is how long you plan on living in your home. If you plan on staying long-term in a new house, fixed-rate mortgages may be the better option. Fixed-rate mortgages offer greater stability over time compared to adjustable-rate mortgages, but adjustable-rate mortgages might offer lower interest rates upfront. If you don't have plans to keep your new house for more than three to 10 years, though, an adjustable-rate mortgage may give you a better deal. There is no best loan term as a rule of thumb; it all depends on your goals and your current financial situation. It's important to do your research and know your own priorities when choosing a mortgage.

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