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Mortgage Interest Rates Forecast For 2022

Melissa Brock5-minute read

June 23, 2022

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Are you planning to purchase a home this year? If you're like many individuals 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 as well, including slow home prices and also slow demand for homes, according to Freddie Mac.

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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 invasion of 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 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?

Interest rates declined throughout 2019 and when January 2020 rolled around, the average rate for a 30-year fixed was about 3.7%. Furthermore, when COVID-19 hit the United States, the Federal Reserve responded by dropping the federal funds rate to between 0% – 0.25%.

In 2021, mortgage interest rates were 2.98% on January 21 and by October 21, Freddie Mac reported an average mortgage rate of 3.09% for 30-year mortgages. Though mortgage rate forecasts predict a continual increase in mortgage rates, these interest rates will be lower than historical mortgage rates, according to Freddie Mac.

2022 Mortgage Interest Rates Forecast

At their December 15 meeting, Fed officials announced that they expect to boost rates three times in 2022. However, it's important to note that the Fed doesn't raise mortgage interest rates directly. As of March 17, 2022, the Board of Governors of the Federal Reserve System voted unanimously to approve a 1/4 percentage point increase in the primary credit rate to 0.5%, affecting borrowers.

More recently, the Fed has indicated they may raise the federal funds rate more aggressively in an attempt to control inflation.

Mortgage Rates From January – March 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%

As of 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%

Mortgage Rates For The Remainder Of 2022

In the week ending April 7, 2022, mortgage rates rose again, inching closer to 5%. That’s the highest since December 2018. The last time mortgage rates increased 1.5% points in 3 months was back in 1994. It’s important to note that even if rates push past 5%, it’s 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 started? Rocket Mortgage® can walk you through the entire process from start to finish. You can also give us a call at (833) 326-6018.

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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.