Mortgage Rate Expectations

According to a Primary Mortgage Market Survey from Freddie Mac, mortgage rates are increasing dramatically to start the year. In fact, data in this survey shows that the 30-year fixed-rate mortgage has increased over 1% in 3 months. Starting the year at around 3.22%, mortgage rates have ticked up to 4.42% in recent weeks. Surprisingly, rates increased by over a quarter percent last week alone. Mortgage rates have been a volatile topic in 2022, and will likely continue this trend throughout the year. Here are some mortgage rate expectations for the next months. 

According to expert predictions at the beginning of the year, many thought that mortgage rates would top out at around 3.5% this early in the year. Well, most expert predictions were incorrect. In fact, not many experts even predicted 4% mortgage rates for the entire year, yet alone 4% by April. Just weeks ago, many of these same experts revised their mortgage rate expectations to 3.8% for 2022. Yet again, these predictions look a bit zealous and not sustainable. Mortgage rates will likely continue to increase in 2022, well above even the most out there predictions. 

According to Sam Khater, Chief Economist from Freddie Mac:

“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?

According to a recent Bankrate article, here are several industry experts and how they weighed in on the mortgage rate market going forward. Here are their inputs:

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. . . .”

Mortgage Rate Expectations And Buying

Because we have seen home values increase, buyers are already strapped for cash and their budgets are slim. Add rapidly increasing mortgage rates, and buyers are really going to be in for a tough market going forward. The sooner you are willing to buy a home, the more likely you are to save money throughout the course of your mortgage. Remember, mortgage rates are still well below the 10 year average. Mortgage rates are increasing, and are the highest since 2018, but the average is still lower than the average.

Buying a home now might seem like a daunting task, but remember, real estate is an inflation hedge. With prices of everything going up, being able to lock in a monthly housing payment for 30 years allows you to budget for other price increases. Not to mention, buying a home in a market when prices are increasing rapidly allows you to gain equity at an expedited rate. 

While your mortgage payments will be higher based on home prices and mortgage rates, there is nothing to fear about. In a market like today, you will see substantial growth in your equity valuation because of price increases in homes everywhere. According to a quarterly investment survey from Pulsenomics, there is even more upside being priced in for home prices in 2022. Last quarter, Puslenomics released that their Home Price Expectation Survey shows these surveyed economists call for another near double-digit home price increase.