Have you been planning to buy a home this year and wondering what the mortgage interest rates for 2022 are? Well! Here is what you need to know about what will possibly happen with interest rates in 2022.
The biggest question for many is whether the mortgage rates are going up.
According to the housing market predictions for 2022, mortgage rates will possibly continue to go up into the rest of this year. In this post, we will look at the factors that affect mortgage rates and their upward movement.
What is Mortgage Interest Rates Forecasting?
What we mean by mortgage interest rate forecasting is when mortgage experts foretell how interest rates will increase or decrease during a particular period.
Which Factors Affect Mortgage Rates?
There are so many factors that affect mortgage rates. Some of them include; inflation, economic crises, world events, and personal factors – the Federal Reserve and bond prices can also play a role.
1. Inflation
Inflation and mortgage rates are two inseparable topics. Once the level of inflation goes up, interest rates increase as well so as to keep up with the dollar value. On the other hand, when inflation decreases, the mortgage rates drop as well. For a period of low inflation, mortgage rates have a tendency to stay the same or fluctuate slightly.
3. World Events
World events, like the COVID-19 pandemic or even the Russian invasion of Ukraine, surely influence mortgage interest rates. In historical events, we have seen mortgage rates being affected by events such as World War II, the oil embargo from 1973 to 1974, the housing market crash in 2007-2009, and Brexit, for instance.
3. Economic Crises
Interest rates normally drop in a recession and rise as the economy recovers. For instance, if you took an adjustable-rate loan (ARM) during a recession, the interest rate is likely to increase when the decline comes to an end. Pointers of economic growth or crises can be employment numbers and the gross domestic product (GDP).
4. Personal Factors
Mortgage interest rates are also influenced by lenders looking at your personal finances and some other personal factors. Some of these factors can be the amount you wish to borrow, the repayment term, your employment status and the income you get, your debt-to-income ratio, and your credit score.
5. The Federal Reserve
The Federal Reserve normally affects short-term interest rates by increasing or decreasing them dependent on the economy to control the money supply. When the Federal decides to constrict the money supply, one of the things they do is raise interest rates on consumer borrowing – that includes mortgage rates. By the Federal Reserve making it expensive for the banks to borrow by increasing the Federal Fund rate, the banks then pass the high costs on to the customers.
6. Bond Prices
Mortgage interest rates decrease as bond prices increase, and the other way round. Mortgage lenders draw their interest rates close to 10-year treasury rates. Therefore, mortgage rates go up or down depending on demand.
Are Mortgage Interest Rates Increasing?
Mortgage interest rates went down throughout 2019. In January of 2020, the average rate for a 30-year loan was around 3.7%. When COVID-19 knocked the United States, the Federal Reserve acted by decreasing the federal funds rate to between 0% – 0.25%.
In January of 2021, mortgage interest rates went to 2.98% and by October, the Freddie Mac average mortgage rate report was 3.09% for 30-year mortgages. According to Freddie Mac, the interest rates will be lower than mortgage rates in the past despite the mortgage rate forecast predicting a continual increase in mortgage rates.
2022 Mortgage Interest Rates Forecast
At a meeting on December 15, the Federal officials made it known that they were expecting to boost the rates three times in 2022. Nevertheless, it’s important for you to note that the Fed does not increase mortgage interest rates directly. In March of 2022, the Board of Governors at the Federal Reserve System voted solidly in favor of a 1/4 percentage increase in the primary credit rate to 0.5%.
In recent days, the Federal has pointed out they may increase the federal funds rate more in an attempt to regulate inflation.
What Does the 2022 Mortgage Interest Rates Forecast Mean for Borrowers?
- If you are thinking of refinancing, it’s best you do it sooner so as to lock in a lower fixed rate. If mortgage rates continue to increase through the year, you might not get a better and cheaper time to refinance,
- If you have also been wanting to buy a home and your finances are in order, it’s also best if you do that sooner before the rates increase more. By buying a home today compared to 6 months from now, you are in a better position to save thousands of dollars in interest.
What if you are not yet ready to buy a home?
- You might feel like you are missing out by not buying a home while the rates are low, but it’s important for you to wait until you are financially ready for a mortgage loan instead of locking in a low-interest rate and then having difficulty in repayment.
- You should also note that the market rate is not the only thing that influences your mortgage rate. Your credit, debt-to-income ratio, and your down payment all come into play when your lender is figuring out the rate they will give you for your home loan.
What is the Downside of Mortgage Interest Rates Forecasting?
Mortgage rate forecasting does not mean it has to be 100% right. It’s best to treat this as a guide. In the past, mortgage rates have been seen to take unexpected turns. Nevertheless, these predictions are meant to help you in planning to buy your home in the future.
The Bottom Line
In this post, we have taken an in-depth look at mortgage rates specifically in 2022. Here are some of the many things we have looked at:
Mortgage interest rate forecasting is all about experts predicting how interest rates will go up or down over time. It is also predicted that mortgage rates will continuously increase in 2022.
There are many factors that influence mortgage rates. Some of them include inflation, world events, personal factors, economic crises, the Federal Reserve, and even bond prices. Although mortgage interest rates are increasing, it looks that they will still be lower than mortgage rates in the past.
It is best if you consider taking action now and locking in your low rate now before the next increase. Are you ready to get started now? Pillar Mortgage can help you through every step of the entire mortgage process from start to finish. Call Us Today!
