Mortgage Rates | Home Mortgage |

Are Mortgage Rates Going to Rise in 2022?

Friday, March 11, 2022
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With inflation continuing to rise, those following the housing market are starting to worry that it could affect the historic lows that Americans have enjoyed in mortgage rates lately. The Consumer Price Index (CPI), which measures inflation by consumer goods and services, saw a 6.8% rise in the yearlong period ending in November 2021—the highest jump in 40 years. We’ve already seen some rise in mortgage rates at the end of 2021 when they raised from 2.67% in January to 3.12% in December. Still, the lower 3% range remains historically low.

Not only is the level of inflation we’re experiencing a concern, but also the Federal Reserve plans to taper off asset purchases while increasing the federal funds rate. Both of these actions could raise mortgage rates. So, what do the experts expect from mortgage rates in 2022?

March 2022 Mortgage Rates Forecast

Some experts are predicting a rise in mortgage rates to the upper 3% to 4% range by the end of the year. Selma Hepp, the deputy chief economist at CoreLogic, expects rates to rise to about 3.4% by the end of 2022. However, Michael Frantantoni, the chief economist for Mortgage Bankers Association, is predicting that rates may reach as high as 4% by year’s end.

Not everyone believes that the Federal Reserve’s actions and the rising inflation will have so much of an effect on our mortgage rates, though. Many are looking to Treasury yields, which mortgage rates have been closely tied to, and finding a more optimistic future. Since Treasury yields are not expected to rise much or at all in the coming year, this would mean that mortgage rates will remain below the 3.5% level.

If mortgage rates do get higher but stay within a half-percentage point of where they are now (raising up to 3.6%), that should not cause a disruption in the market. We may have become accustomed to these low rates, but it’s important to remember that in 2019, the 3.6% mortgage rates were a record low. Also, if a COVID variant spikes again, this could calm the mortgage rates market, keeping it where it is or even lowering it more.

Should You Still Refinance Your Mortgage?

With the gradual rising of mortgage rates, refinancing has lowered significantly. However, with mixed predictions and uncertainty in the market, if you are considering refinancing you may want to do it while you still can. It might not be a good idea to bet on rates lowering in the coming year.

If you’re wondering how much value would make refinancing worth it, generally if you can reduce your mortgage rate by 0.5% to 1% then it is a worthwhile move. However, you need to take into account the full picture of your mortgage, don’t just go by the mortgage rate alone. If you have fewer years on your current mortgage but a slightly higher rate, then refinancing to even a 1% lower rate for a longer period of time could mean paying thousands more in interest over the lifetime of the mortgage. Make sure to do careful calculations before you commit.

Also, remember to keep in mind how long you plan to stay in your home. Closing costs on a newly refinanced loan can cost you tons, emptying your savings. If you don’t plan to stay in your home for a number of years, refinancing your mortgage can actually cost more money when closing costs hit.

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