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Mortgage Interest Rates Forecast For 2022

Melissa Brock5-minute read

September 23, 2022

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Are you planning to purchase a home this year? If you're like many potential home buyers who are looking for information about what will happen with interest rates, it's worth considering the 2022 mortgage interest rates forecast.

But the big question is, are interest rates going up? More specifically, are mortgage rates going up?

According to 2022 housing market predictions, mortgage rates are likely to continue to rise going into the rest of this year. Let's go over factors that affect mortgage rates and more information about their movement in 2022.

Mortgage Interest Rates Forecasting Explained

Mortgage interest rate forecasting refers to when experts predict how interest rates will increase or decrease. You may have noted how rates have changed over the last couple of years.

We've mentioned rates are rising in 2022, which brings other implications that are driving home prices upward, including a slower demand for homes, according to Freddie Mac.

Lock in today's rates before they go up.

Defend against rising rates with RateShield®.1

Factors That Affect Mortgage Rates

Many factors affect mortgage rates. Inflation, world events, economic crises, personal factors, the Federal Reserve and even bond prices can play a role:

Inflation

Mortgage rates and inflation go hand in hand. When inflation increases, typically interest rates increase too so they can keep up with the value of the dollar. If inflation decreases, mortgage rates drop. During periods of low inflation, mortgage rates tend to stay the same or slightly fluctuate.

World Events

World events, such as the COVID-19 pandemic and the Russian conflict with Ukraine, affect mortgage interest rates. Over the course of history, mortgage rates have been affected by World War II, the oil embargo in the 1970s and 1980s, the housing market crash in 2007 and Brexit, for example.

Economic Crises

Interest rates usually fall early in a recession and typically rise as the economy recovers. For example, let's say you take out an adjustable-rate loan (ARM) during a recession, the interest rate will likely increase when the downturn comes to an end. Indicators of economic growth (and economic crises) include employment numbers and gross domestic product (GDP).

Personal Factors

Mortgage interest rates also depend on lenders taking a look at your personal finances and other personal factors, such as the amount you plan to borrow, your repayment term, employment status and income, debt-to-income ratio and credit score. All of these things, taken together, also affect your personal mortgage interest rate.

The Federal Reserve

The Federal Reserve (the Fed) affects short-term interest rates by increasing them or decreasing them based on the economy to control the money supply. When the Fed decides they need to tighten up the money supply, they raise interest rates on consumer borrowing, including mortgage rates. When the Federal Reserve makes it more expensive for banks to borrow due to a higher federal funds rate, the banks pass higher costs on to customers.  

Bond Prices

Mortgage interest rates go down as bond prices go up. As bond prices go down, mortgage interest rates go up. Mortgage lenders tie their interest rates closely to 10-Year Treasury rates. Mortgage rates increase or decrease depending on demand.

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Are Mortgage Interest Rates Going Up?

In early 2022, the Fed indicated they may raise the federal funds rate more aggressively in an attempt to control inflation, and they’ve since followed through with their word. On September 21, 2022, the Fed hiked interest rates by 3/4 of a percentage point, marking the fifth rate hike in 2022.  This rate hike brought the federal funds rate to 3.25%, the highest since 2019. This, in turn, has caused mortgage rates to rise.

So, how can you determine how much the rising federal funds rate is expected to impact your potential mortgage interest rates? Each quarter, Freddie Mac publishes a report with its rate predictions. Freddie Mac’s Economic & Housing Research Group forecasts what we can expect from interest rates in the coming months. You may want to keep tabs on this report to see what's potentially coming in the future.

2022 Mortgage Interest Rates Forecast

At their December 15 meeting, Fed officials announced that they expect to boost rates three times in 2022. So far, they have boosted rates a total of five times.

As mentioned above, the Fed has since continued to raise the primary rate in an effort to combat inflation. Let’s take a closer look at how this has impacted mortgage rates so far this year and how it's expected to affect mortgage rates moving forward. 

Mortgage Rates From January 2022 – July 2022

According to Freddie Mac's Primary Mortgage Market Survey, the interest rate in the first week of January 2022 was as follows:

  • 30-year mortgage: 3.22%
  • 15-year mortgage: 2.43%
  • 5/1 adjustable-rate mortgage (ARM): 2.41%

On the week ending March 31, 2022, Freddie Mac's Primary Mortgage Market Survey reported the following:

  • 30-year mortgage: 4.67%
  • 15-year mortgage: 3.83%
  • 5/1 ARM: 3.50%

As of the week ending July 29, 2022, Freddie Mac’s Primary Mortgage Market Survey showed the following interest rates: 

  • 30-year mortgage: 5.3%
  • 15-year mortgage: 4.58%
  • 5/1 ARM: 4.29%

Now, as it stands in September 2022, rates have slowly risen even further, sometimes north of 6%.

Mortgage Rates For The Remainder Of 2022

With mortgage rates over 5% and even 6% for the first time since December 2018, many potential home buyers have found themselves wondering if rates are going to drop any time soon. Unfortunately for those seeking the historically low rates of the year prior, rates are expected to continue steadily increasing in 2022.

While mortgage rates aren’t expected to decrease in the near future, it’s also important to note that rates are still on par or better than rates available in the last couple decades. 

What The 2022 Mortgage Interest Rates Forecast Means For Borrowers

What are the implications of the predicted 2022 mortgage rates for borrowers? If you are considering refinancing, do so sooner rather than later in order to lock in a low fixed rate.

If experts are correct and mortgage rates continue to rise throughout the year, you may not find a cheaper time to refinance.

If you’ve been planning to buy a home and have your finances in order, it may also be worth buying soon, before rates have a chance to increase. By purchasing a home today rather than 6 months from now, you could potentially be saving yourself tens of thousands of dollars in interest over the life of the loan.

But what if you’re not quite ready to buy yet?

It can be easy to feel that you’re missing out by not buying while rates are low. It's true that waiting to buy might mean you end up with a higher interest rate. However, it's important to consider waiting until you’re financially ready for a mortgage rather than locking in a low interest rate before you’re really ready.

Always remember that the current market rate isn’t the only thing that affects your mortgage rate. Your creditworthiness, debt-to-income ratio and down payment all factor into the rate your lender will give you for your mortgage.

The Caveat Of Mortgage Interest Rates Forecasting

Mortgage rate forecasting is not a sure thing. It's a good idea to treat these forecasts as a guide rather than a hard-and-fast rule. Mortgage rates have taken some unexpected turns over the past 2 years, and experts have certainly been wrong before. However, these predictions may help you plan your home purchases in the future.

Each quarter, Freddie Mac publishes a quarterly report with its mortgage rate predictions. Using the economic outlook at past and current rates, Freddie Mac’s Economic & Housing Research Group forecasts what we can expect from rates in the coming months. You may want to keep tabs on this report to see what's coming down the pike.

The Bottom Line

Mortgage interest rate forecasting refers to when experts predict how interest rates will increase or decrease over time. Mortgage rates are likely to continue to rise in 2022.

Many factors influence mortgage rates, including inflation, world events, economic crises, personal factors, the Federal Reserve and even bond prices. Even though mortgage interest rates increase, they will still be lower than historical mortgage rates.

Consider acting now to lock in your rate before the next increase. Ready to get your initial approval? Rocket Mortgage® can walk you through the entire process from start to finish. You can also give us a call at (833) 326-6018.

Protect yourself from rising rates for 90 days.

Lock in today's rate with RateShield®.1

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Melissa Brock.

Melissa Brock

Melissa Brock is a freelance writer and editor who writes about higher education, trading, investing, personal finance, cryptocurrency, mortgages and insurance. Melissa also writes SEO-driven blog copy for independent educational consultants and runs her website, College Money Tips, to help families navigate the college journey. She spent 12 years in the admission office at her alma mater.