Will mortgage rates get too high in 2022?

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Mortgage rates have gone up. Will they keep climbing?


Key points

  • The average 30-year mortgage rate was nearly 3.8% at the start of February.
  • If mortgage rates continue to rise, it could make home ownership out of reach for many people.

There’s a reason demand for homes has remained strong throughout 2021 despite record prices. Mortgage rates held at affordable levels last year, and were low enough to help offset rising purchase prices.

But we are starting 2022 in a different place. Mortgage rates rose steadily in January and by early February the average 30-year mortgage rate was close to 3.8%. In contrast, a year ago it was possible to get a 30-year mortgage at around 2.8%.

Now, let’s be clear on one thing. Historically speaking, 3.8% remains an extremely competitive interest rate for a 30-year loan. But if mortgage rates continue to climb, it could create a scenario where more and more buyers find it difficult to break into the housing market. The question is: how high will mortgage rates go this year?

Will mortgage rates continue to rise?

Without a crystal ball, it’s hard to predict how much mortgage rates will rise this year. But while rates jumped noticeably in January, we’ll likely see that pace slow as the year progresses.

Still, based on recent moves, it’s fair to assume that the average 30-year mortgage could hit 4% in the first half of the year. And we could be looking at over 4.5% – or more – by the end of 2022.

One factor that is likely to push rates up is the Federal Reserve’s decision to raise interest rates. The Federal Reserve is not responsible for setting consumer interest rates or setting mortgage rates. Instead, the Federal Reserve determines the rate banks charge each other for short-term borrowing.

But the actions of the Federal Reserve can influence consumer interest rates. And that can be a good thing and a bad thing.

Rising rates could result in people with money in the bank earning more interest on their savings accounts. But rising rates could also make borrowing more expensive by pushing up interest rates for everything from mortgages to personal loans to credit cards.

Will you be able to afford a house in 2022?

While rising mortgage rates will undoubtedly make it harder to buy a home this year, rates could also lead to lower demand from buyers. Once demand begins to decline, house prices may begin to decline.

You may find yourself in a steady state this year where mortgage rates are higher than they were in 2021, but house prices are also low enough from recent highs that you can buy your own. lodging. In fact, this would be a good situation for buyers who can make a higher monthly mortgage payment, but have limited funds to put down in the form of a down payment.

Ultimately, it’s hard to know exactly how mortgage rates will move this year. Although we can expect them to be higher than they were in 2021, they could still remain quite competitive for the rest of 2022.

A Historic Opportunity to Save Potentially Thousands of Dollars on Your Mortgage

Chances are interest rates won’t stay at multi-decade lows much longer. That’s why it’s crucial to act today, whether you want to refinance and lower your mortgage payments or are ready to pull the trigger on buying a new home.

Ascent’s in-house mortgage expert recommends this company find a low rate – and in fact, he’s used them himself to refi (twice!). Click here to learn more and see your rate. While this does not influence our product opinions, we do receive compensation from partners whose offers appear here. We are by your side, always. See The Ascent’s full announcer disclosure here.

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