2022 Mortgage Rate Predictions

An increase in mortgage rates and rising housing costs are important things to look at when determining when to buy a home. Some recent forecasts of mortgage rates in 2022 show an increase from the lows we are currently at. These were estimated by researchers within Freddie Mac as well as the Mortgage Bankers Association.

2022 Mortgage Rate Forcast

In July of 2021, the economic research team from Freddie Mac predicted mortgage rates in the U.S. would gradually rise through the end of this year and into 2022.

At the time of this prediction, rates were hovering around 2.8%. Their forecast is estimating a slow rise for 30-year fixed home loans to around 3.8% by the end of 2022. This rise may seem insigificant to some, but if you run the numbers it makes a big difference in what you'll end up paying in interest.

While this is just the prediction of one group, a very notable one, we've seen similar predictions from many economists and research groups. The Mortgage Bankers Association, mentioned earlier, has recently predicted that 30-year fixed home loans could even rise above 4% next year. Overall, we're seeing a trend of predictions showing an increase in rates.

What is Driving up the Rates?

Often when talking about rising rates, the Federal Reserve and their policies will be attributed to influencing mortgage rates. While their influence can be a factor, they do not control them directly.

Things to keep an eye on are rising inflation and economic growth. Looking at historical data, rates tend to trend upward along with inflation and over the past months we've seen a rise in inflation. On top of this we are currently experiencing economic growth within the U.S. as a whole. This can also apply upward pressure on interest rates.

Concerns of Rising Home Prices

We've seen a tremendous rise in home value over the past year. This is a concern for some wondering if the trend will continue, level out, or even crash. While nobody can say for sure, it's more than likely we won't see a significant crash in prices, but there is an expectation from them to level off. However, waiting for this correction could mean more lost money through interest in the rising mortgage rates.

For example let's take the average sold price in Austin, TX as of August 2021 at $656,784. With a 20% downpayment you're looking at a loan amount of $525,427. Freddie Mac is showing an average mortgage rate as of August this year at 2.84%, with this rate in mind over a 30-year loan you'll pay a total interest amount of $255,823. Now if interest rates increase just 1%, you will end up paying $104,438 more in total interest over the same loan period. This means your monthly mortgage payment increases from $2,170 a month to $2,460.

It's important to work with your realtor, mortgage lender, and other resources to determine when the best time to buy is and what you should buy. If you have any questions we would love to be a resource.

Sources:

Freddie Mac and Mortgage Bankers Association

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