What’s Happening with Mortgage Rates, and Where Will They Go from Here?

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: As mortgage rates across all loan types continued to rise this week, the 30-year fixed-rate mortgage jumped by more than a quarter of a percent. Inflation is rising, and the Federal Reserve's activities are eroding 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:

"With inflation estimates continuing to surprise on the upside, 30-year fixed mortgage rates will remain over 4.0 percent," says Greg McBride, Bankrate's Chief Financial Analyst.

"While higher short-term interest rates will force up mortgage rates, I expect part of this impact to be tempered over time by lower inflation," says Nadia Evangelou, Senior Economist and Director of Forecasting at the National Association of Realtors (NAR). As a result, I anticipate that the 30-year fixed mortgage rate will continue to rise, though not at the same rapid pace as in recent weeks."

"Mortgage rates are anticipated to continue to rise during the balance of 2022," says Len Kiefer, Freddie Mac's Deputy Chief Economist. "However, the pace of rate rises is likely to reduce."

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

"As markets analyze the Fed's updated economic estimates, I foresee a further increase in mortgage rates over the next several months," says Danielle Hale, Chief Economist at realtor.com.

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. Let's connect right now to get started.

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