Will Home Loan Rates Increase in 2022? An Expert's Perspective

The Federal Reserve's June hike caused mortgage rates to jump 55 basis points (0.55%) in the biggest weekly increase since 1987. This, combined with rising house prices, has made home loans more expensive for Americans. Dibugnara anticipates that August rates will not exceed 5.5 percent and 4.875 percent for 30- and 15-year fixed mortgages, respectively. The average cost of a 15-year fixed-rate mortgage also increased to 4.85% in late August, compared to 2.43% in early January. Fannie Mae and the National Association of Homebuilders are at the lower end of the group, estimating that the 30-year average fixed interest rate will be below 5.2% by the end of the third quarter.

Many experts wonder if inflation peaked and if mortgage rate growth will also begin to decline. It's a lever that borrowers can use to lower their monthly mortgage costs and paying your rate could save thousands of dollars over the life of your mortgage loan. Mortgage rates are caught in a tug-of-war between rising inflation, which pushes rates higher, versus Federal Reserve actions to maintain inflation, which indirectly drives down mortgage rates. Before setting your rate, confirm with your mortgage lender if it can be extended (and, if so, how much it will cost).

One way to give yourself more flexibility is to avoid closing costs by accepting a higher interest rate in exchange for lender loans. But, instead, the seller can pay two mortgage points at closing, reducing the buyer's mortgage rate by 0.5%. If you're buying a home, the right time to set a rate is after you've secured a purchase agreement and looked for the best mortgage offer. Buying rates doesn't just mean looking for the lowest rates advertised online, because they're not available to everyone.

With homes selling longer on the market and interest rates possibly peaked, now is not the time to give up or be erratic with your money.

Alexandria Meekins
Alexandria Meekins

Social media expert. Infuriatingly humble internet trailblazer. Incurable internet aficionado.

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