What's Going On With Mortgage Rates, And Where Are They Headed?

Thursday, March 31, 2022   /   by Raj Jaggi

What's Going On With Mortgage Rates, And Where Are They Headed?

What Causes Changes in Mortgage Interest Rates?

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 point. Here's a chart that shows how mortgage rate movement in 2021 was relatively stable compared to this year's quick rise:



Freddie Mac predicted 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.
In a news release issued last week, Freddie Mac's Chief Economist, Sam Khater, stated:

“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.”

What Is the Future of Mortgage Rates?

Several industry experts weighed in on where rates might be headed in the future in a recent Bankrate piece. Here are a few of their predictions:

Bankrate's Chief Financial Analyst, Greg McBride:

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

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

“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.”

Freddie Mac's Deputy Chief Economist, Len Kiefer:

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

Another expert weighs in on the topic in a recent realtor.com article:

realtor.com Chief Economist, Danielle Hale:

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

So, if you're looking to buy a house, what does this mean for you?

If you can, buy sooner rather than later, because both mortgage rates and home 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 once 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 home prices. Pulsenomics polls a panel of over 100 economists, investment strategists, and housing market professionals every quarter to gauge their views on future home prices in the United States. Pulsenomics issued their most recent Home Price Expectation Survey last week. According to the survey, the average of the experts' predictions for property values in 2022 is a 9% increase.

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

Conclusion

Having to pay a higher home 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. To get started, contact a real estate expert today.

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