What’s The Latest On Mortgage Rates, and Where Are They Heading?

A recent report from Freddie Mac, the Primary Mortgage Market Survey, shares that the average 30-year fixed-rate mortgage has increased by 1.2% (3.22% to 4.42%) since January of this year. From just a week ago, that rate has already jumped by more than a quarter of a point.

To put that into perspective, look at the visual below. It shows a steady mortgage rate movement throughout 2021 against the comparatively rapid increase since just a few months ago:

line graph shoeing mortgage rates increasing from Jan 2021 to Mar 2022

Now, Freddie Mac projected just a few months ago that mortgage rates would average 3.6% in 2022.  Just a few weeks ago, a Fannie Mae forecast put mortgage rates at an average of 3.8% in 2022. 

Those estimates are already low in comparison to the chart above, which shows that rates have already gone past those projections.

Sam Khater, Chief Economist at Freddie Mac, released a press release last week that explains the forces behind these rates:

“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 Are Experts Predicting For Mortgage Rates Now

A recently released article by Bankrate features a number of industry professionals sharing their own predictions on where mortgage rates could go. This is what they had to say: 

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.”

Adding to this conversion is expert Danielle Hale of realtor.com with this article:

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. . . .”

How Do Changing Mortgage Rates Affect Your Home Buying Process?

The short answer: it’s better to buy sooner rather than later. 

Given that experts across the industry are expecting both mortgage rates and home values to increase for the rest of 2022, acting now is likely to put you in a better position for the long term.

As you wait, the costs for homes and mortgage rates will both rise, which will end up costing you more. 

Feeling remorse for not having bought last year? There’s still a silver lining to buying your home now. Though the prices are higher for both homes and mortgages and the past year, the upward trend for both of them should still be a boon to you and your family over the long run.

Think of it this way. With a home valued at $400,000 today, you could put 10% down and take out a $360,000 mortgage. Thanks to a quick calculation at mortgagecalculator.net, your mortgage payment with a 4.42% fixed mortgage rate would end up at $1,807 a month. (I’ll note here that this is a simple calculation based purely on the mortgage and does not include insurance, taxes, and other fees, as those vary by location.)

With the substantial growth in equity that comes with rising home prices we can take a new look at our mortgage payment. We’ll do that by taking information from a quarterly report by Pulsemonics which includes survey results from a panel of over 100 economists, investment strategists, and house marketing analysis. This panel shares their expectations for future home prices in the U.S. Just last week, the latest Pulsenomics Home Price Expectation Survey was released, revealing the experts’ forecasts calling for, on average, a 9% increase in home values in 2022.

Let’s go back to that house you just bought. With those projections in mind for your $400,000 house, you could reasonably expect its value to be $436,000 in just a year’s time. Broken down by month, your equity in the home increases by about $3,000 each month in that period. A monthly $3,000 increase in equity is more than your mortgage payment is likely to be over the same period. 

Of course, that bump in your net worth is tied to the home. Still, it’s a concrete way to visualize how this projected home price appreciation will benefit you..

Conclusions On Rising Home Prices And Rising Mortgage Rates

It’s only human nature to want to get the best deal possible. WIth that, knowingly paying a higher price for your home and a higher rate for your mortgage can be hard to deal with.

Still, if you’re in the market and ready now, know that waiting will end up costing you more.

If the time is right for you and it’s a matter of now or a few months, or now and a year, now is the better option. If you’d like to chat about your options, I encourage you to reach out and give TAC MD a call.