Mortgage Interest Rates Forecast 2022: a Handy Guide

Mortgage Interest Rates Forecast 2022: a Handy Guide

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By Dikran Seferian September 11, 2022

The scorching summer season and a new virus every other week aren’t the only things Americans are protesting over. Throw in inflation and rising interest rates — the mortgage rates, in particular — and you have a force to be reckoned with. If you’re looking to buy a home anytime soon, mortgage interest rates forecast for the near future is something you may want to consider. 

Noticed how the interest rates have shifted over the past two years? It helps to know what causes these fluctuations and what to expect in the near future; we can do that with mortgage rate predictions from experts.

What Are Mortgage Rates?

Mortgage rates basically refer to the costs involved in obtaining a loan as a means of financing a home purchase. Naturally, prices of homes are usually on the higher side and paying for them in cash is often out of the question. As such, buyers normally choose to extend the monthly payments over a long stretch of time — usually up to 30 years — for a more comfortable payment plan. But as interest rates go up due to economic changes, mortgage rates follow suit. 

What Is a Mortgage Rate Lock?

As the name might suggest, a mortgage rate lock essentially guarantees that the rate in your mortgage application is the one you’ll be paying — given you don’t make any alterations to the application. At a time when interest rates are volatile like now, it can be a good idea to lock in a rate that you’ll be able to afford. 

As long as you don’t make any changes in your mortgage application, the rate you lock will be the one you’ll be.

As long as you don’t make any changes in your mortgage application, the rate you lock will be the one you’ll be.

When Should You Lock Your Mortgage Rate?

Timing any market can be somewhat tricky, and the same goes for mortgage rate trends. When the market is turbulent and rates are expected to remain stable, you may want to consider locking a rate that corresponds with your budget. Make sure to ask the lender about what would happen if you don’t close within a specified period of time in the agreement — as well as what you can do if the rates decrease after you lock yours in. 

What Are the Factors That Influence Mortgage Rates?

A number of factors can have an impact on US mortgage rates that are worth considering when buying a new home. These can be anything from the state of the economy to major events that are happening in the world. 

Inflation Rates

Mortgage interest rates normally go hand in hand with inflation. A rise in inflation results in an increase in US mortgage rates. Bear in mind that the rates need to be on par with the value of the dollar. And when the inflation rate goes down, so do the mortgage rates. At times when inflation is low, the interest rates typically remain stable or undergo slight fluctuations. 

Inflation is another factor that affects mortgage rate trends.

Inflation is another factor that affects mortgage rate trends.

Major Global Events

Major global events often have a considerable effect on mortgage rate trends — the Covid-19 pandemic and the conflict in Ukraine being prime examples. A number of events across the world have had an impact on mortgage rates over the past century. These include the Second World War, the 1970s and 1980s oil embargo, the 2007 housing market crash, as well as Brexit. 

Economic Crises

Among the first to fall in the event of a recession are interest rates, often rising as the economy picks back up. Let’s suppose you’re obtaining an adjustable-rate mortgage during a recession. The interest rate will probably be on the rise once the crisis fades away. Factors such as employment rates as well as gross domestic product (GDP) often indicate the state of the economy. 

The Central Bank

The central bank, commonly known as the Federal Reserve, is another factor that can influence short-term interest rates by raising or reducing them to control the supply of money — according to the economy. The Federal Reserve increases the interest rates as a way of limiting the money supply. This, of course, includes US mortgage rates. And when the Fed raises the federal funds rate, making it harder for banks to borrow, the higher costs ultimately fall onto the customers. 

The Federal Reserve can decide to increase or decrease interest rates as a way of controlling the money supply.

The Federal Reserve can decide to increase or decrease interest rates as a way of controlling the money supply.

Prices of Bonds

The housing market mortgage rates are indirectly related to bond prices. This means that an increase in the prices of bonds leads to a decrease in mortgage interest rates, and vice versa. It’s also worth mentioning that interest rates are closely tied to 10-year Treasury rates, and fluctuations in mortgage rates largely depend on demand. 

Personal Factors

Mortgage lenders will naturally check your personal finances as well as other details. These include how much you plan on borrowing, terms of repayment, income, credit score, employment status, and the ratio of debt-to-income. All of these factors combined will normally have an influence on your personal mortgage rate. A shining credit score, for instance, will certainly prove to be beneficial. 

Current Mortgage Rate Trends

Mortgage rates in 2022 have been on the rise since the beginning of the year. As of June 28, for instance, the average rate is 5.3 percent for a 30-year fixed and 4.58 percent for a 15-year fixed — compared to 3.22 and 2.43 percent in January, respectively. 

US Treasury bond rates, which have an impact on mortgage rates, have bumped into two obstacles in 2022 so far. The first one came in late February and the second one around mid-May. These two periods saw a decline in bond yields and, in turn, mortgage rates. 

A majority of experts in the mortgage market believe that rates will experience turbulence over the following few months. However, they also predict that the rates will most likely settle slightly above the current figures for the next couple of years. 

Forecasts indicate that mortgage interest rate trends will be somewhat choppy over the next few months.

Forecasts indicate that mortgage interest rate trends will be somewhat choppy over the next few months.

What Do the Mortgage Rates of 2022 Mean for Homebuyers?

You may be wondering what the forecasted mortgage interest rates of 2022 imply for borrowers. Let’s say you are thinking about refinancing (trading in your current mortgage for a new one). To lock in a reasonable rate, you may want to refinance sooner rather than later. If what the experts are predicting is true and US mortgage rates keep going up, finding a better time to refinance will be unlikely. 

Should you be planning on buying a property and all your finances are in check, you may want to go ahead with your plan as soon as possible — before having to deal with higher rates. Buying a home now rather than waiting six months from today may actually save you tens of thousands in interest over the span of the mortgage repayment. 

In many cases, you may not have the financial ability to invest in a home yet. You may feel as though you’re missing out on the low rates. While you may end up with higher rates by delaying your plans to buy, it’s always better to wait until you’re financially ready to apply for a mortgage. Keep in mind that your mortgage rate doesn’t only depend on the current rate of the market. Your credit score, payment plan, and debt-to-income ratio all influence the rate your mortgage lender will offer. It also helps if you have another house you can rent out, for example. In this case, you may want to consider making it rent-ready

Buying a home as soon as possible will keep you from ending up with higher mortgage rates.

Buying a home as soon as possible will keep you from ending up with higher mortgage rates.

Mortgage interest rate forecasts aren’t always accurate. That being said, it’s always smarter to look at these predictions as a general guide rather than a rule of thumb. The past couple of years have witnessed some unexpected turns in the mortgage market, and experts haven’t always been right with their predictions. Be that as it may, mortgage interest rate forecasts can come in handy when you’re planning on buying a home down the line.

DS

Written by
Dikran Seferian

Written by Dikran Seferian

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