Where Will Mortgage Rates Go in 2022?

The average 30-year fixed-rate mortgage has grown by 1.2 percent (3.22 percent to 4.42 percent) since January, according to Freddie Mac's Primary Mortgage Market Survey. From a week earlier, the rate increased by more than a quarter of a percent. Here's a chart that shows how mortgage rate movement in 2021 was relatively stable compared to this year's quick rise:

Freddie Mac projected that mortgage rates will average 3.6 percent in 2022 just a few months ago. Fannie Mae predicted that mortgage rates will average 3.8 percent in 2022 earlier this month. Rates have already outpaced such estimates, as shown in the graph above.

Sam Khater, Chief Economist at Freddie Mac, explained in a press release last week:

“This week, the 30-year fixed-rate mortgage increased by more than a quarter of a percent as mortgage rates across all loan types continued to move up. Rising inflation, escalating geopolitical uncertainty and the Federal Reserve’s actions are driving rates higher and weakening consumers’ purchasing power.”

Where Are Mortgage Rates Going from Here?

In a recent article by Bankrate, several industry experts weighed in on where rates might be headed going forward. Here are some of their forecasts:

Greg McBride, Chief Financial Analyst, Bankrate:

“With inflation figures continuing to surprise to the upside, mortgage rates will remain above 4.0% on the 30-year fixed.”

Nadia Evangelou, Senior Economist and Director of Forecasting, National Association of Realtors (NAR):

“While higher short-term interest rates will push up mortgage rates, I expect some of this impact to be mitigated eventually through lower inflation. Thus, I expect the 30-year fixed mortgage rate to continue to rise, although we aren’t likely to see the big jumps that occurred over the past few weeks.”

Len Kiefer, Deputy Chief Economist, Freddie Mac:

“Mortgage rates are likely to continue to move higher throughout the balance of 2022, although the pace of rate increases is likely to moderate.”

In a recent realtor.com article, another expert adds to the conversation:

Danielle Hale, Chief Economist, realtor.com:

“. . . As markets digest the Fed’s updated economic projections, I anticipate a continued increase in mortgage rates over the next several months. . . .”

What Does This Mean for You if You’re Looking To Buy a Home?

If you can, buy sooner rather than later, because both mortgage rates and property values are likely to rise throughout the year. That's because the longer you wait, the more it will cost you. However, there may be a silver lining to purchasing a property right now. While you'll pay a greater price and have a higher mortgage rate than last year, rising prices will benefit you in the long run after you buy.

If you bought a $400,000 home today with a 10% down payment, you'd be looking at a $360,000 mortgage. At a 4.42 percent fixed mortgage rate, your monthly mortgage payment would be $1,807, according to mortgagecalculator.net (this does not include insurance, taxes, and other fees because those vary by location).

Let's put that mortgage payment in context now, based on the significant increase in equity that occurs with rising property values. Pulsenomics polls a panel of over 100 economists, financial strategists, and housing market professionals every quarter to gauge their views on future home values in the United States. Pulsenomics issued their most recent Home Price Expectation Survey last week. According to the survey result, the average of the experts' predictions for home prices in 2022 is a 9% increase.

According to their forecasts, a $400,000 home purchased today might be worth $436,000 next year. If you break it down, that implies your home's equity would grow by $3,000 every month throughout that time. This is more than the above-mentioned projected monthly cost. Granted, the growth in your net worth is linked to the property, but it is one method to benefit from the home's price appreciation.

Bottom Line

Having to pay a higher property price and a higher mortgage rate can be a bitter pill to chew. Waiting, on the other hand, will cost you more. Now is a better time to buy a home than a year or even six months from now if you're ready, willing, and able. Let's connect right now to get started.