Mortgage Rate Forecasts & Predictions for 2022: Are Higher Rates Ahead?

A pair of recent mortgage rate forecasts for 2022 predicted that we will see higher mortgage rates next year compared to where we are right now. Those predictions were issued by researchers from the government-sponsored home loan purchaser Freddie Mac, along with the industry group Mortgage Bankers Association.

Mortgage Rate Forecasts for 2022 Predict Higher Rates

In July, the economic research team from Freddie Mac published its latest quarterly forecast for the mortgage industry and housing market. Among other things, they predicted that mortgage rates in the U.S. would gradually rise through the end of this year and into 2022.

Specifically, their mortgage rate forecast for 2022 predicted that the average rate for a 30-year fixed home loan would rise to around 3.8% by the end of 2022.

That’s quite a bit higher than where we are right now, during the summer of 2021. As of late July 2021, the average rate for a 30-year fixed mortgage loan was hovering around 2.8%.

This is actually one of several mortgage rate forecasts for 2022 that predict higher borrowing costs next year. We have encountered similar predictions from a variety of economists, analysts and research groups.

For instance, the Mortgage Bankers Association (an industry group) recently predicted that 30-year mortgage rates could climb above 4% next year. Their long-range mortgage rate forecast for 2022 mirrors similar predictions issued by other analysts. The general consensus appears to be that mortgage rates will be higher in 2022 than where they are right now.

Common Thread: Both Groups Expect to See an Increase

The MBA’s long-range mortgage forecast for 2022 predicted that the average rate for a 30-year home loan could climb to 4.3% by the fourth quarter of 2022. Again, that prediction was issued in July of 2021.

Both of these forecasters — Freddie Mac and the MBA — predicted that 30-year mortgage rates would average around 3.4% by the end of 2021. The key difference in their forecasts has to do with how much of an increase we could see next year.

Freddie Mac’s latest mortgage rate forecast for 2022 predicted that 30-year home loan rates could average in the upper-3% range by the end of next year. MBA’s mortgage rate prediction, on the other hand, suggested that we could see even higher home loan rates by the end of 2022.

Just bear in mind that these are forecasts — not certainties.

Related: Will rates stay low or climb in 2022?

Inflation and Economic Growth Could Drive Up Rates

People often talk about the Federal Reserve and how their policies can indirectly influence mortgage rates. And there is some truth to that. While the Fed does not control mortgage rates directly, their policies can influence the up or down movement of consumer interest rates.

Recently, Federal Reserve officials said they planned to keep the short-term federal funds rate close to zero until sometime in 2023. That’s part of a broader policy designed to boost the overall economy and job market.

Which begs the question: Why do so many mortgage rate forecasts for 2022 predict higher rates next year, if the Fed is holding steady? There are a couple of factors that could be influencing such predictions.

For one thing, inflation has been on the rise over the past months. Historically speaking, mortgage rates tend to rise along with inflation. Additionally, we are currently experiencing a period of economic growth within the United States. This too can put upward pressure on consumer interest rates and borrowing costs.

This could be why mortgage rate predictions and forecasts for 2022 suggest that we will see higher interest rates next year compared to where we are now.

Home Prices Are Another Concern For Home Buyers

Right now, a lot of future home buyers are wondering if we will see higher mortgage rates in 2022. While no one can predict such trends with complete accuracy, several notable mortgage rate forecasts and predictions point to that very scenario. We’ve covered those above.

But that’s not the only concern for those planning to buy a home in 2022. Steadily rising home prices could also affect your purchasing power. In fact, this is probably the biggest concern for those planning to buy a home later this year or next.

Related: Will it be easier to buy next year?

While mortgage rate forecasts for 2022 suggest we could see higher borrowing costs, the impact on the average home buyer could be minimal. Remember that with a 30-year mortgage loan, you are spreading the interest payments out over a long period of time. So the difference between a mortgage rate of, say, 2.9% and 3.2% would be minimal over a 30-year term.

Home prices, on the other hand, can reduce a buyer’s purchasing power to a greater extent.

According to Zillow, the median home value in the United States rose by 15% from July 2020 to July 2021. That’s for the nation as a whole. Some cities with highly competitive real estate markets recorded even bigger gains during that 12 month period — nearing 30% in some cases.

The point is, mortgage rate forecasts and predictions for 2022 predict that we could see higher rates over the coming months. But for many home buyers, that could be a lesser concern when compared to the ongoing rise of house values in the U.S. Home buyers should pay close attention to both of these trends.

Disclaimer: This report includes 2022 mortgage rate predictions and forecasts issued by third parties not associated with the publisher. A prediction is essentially an educated guess. No one can predict future mortgage rate trends with complete accuracy.