If you’re wondering if mortgage rates will stay low in 2022, I have a bit of bad news to deliver. While rates are not expected to surge anytime soon, a pair of recent forecasts suggest that they could rise gradually over the coming months.
Even so, there’s probably no cause for alarm just yet. Mortgage rates might not stay as low as they are right now, going into 2022. But they are expected to remain relatively low from a historical standpoint. If they do creep upward, the trend will likely be gradual in nature.
As of August 2021, the average rate for a 30-year fixed mortgage loan was hovering around 2.86%. That’s based on the weekly survey conducted by Freddie Mac. But rates are expected to be higher than that next year.
The takeaway: If you’re planning to buy a home in 2022, rising home prices are probably a bigger concern for you than interest rates.
Mortgage Rates Could Stay Relatively Low In 2022
So, will mortgage rates stay low in 2022? That really depends on what you mean by the word “low.”
Recently published forecasts from Freddie Mac and the Mortgage Bankers Association suggest that home loan interest rates could rise gradually between now and next year. But both groups expect the average rate for a 30-year fixed mortgage to remain below 4% into the second half of 2022.
The general consensus between these forecasters is that mortgage rates probably won’t stay as low as they are right now into 2022. But they will still be relatively low from a broader historical standpoint.
The first forecast comes from the Mortgage Bankers Association. In August 2021, the industry group offered a long-range outlook for mortgage rates extending through 2022. Clearly, they do not expect mortgage rates to stay as low as they are right now. Instead, MBA’s researchers predicted that rates would rise gradually over the coming months and perhaps climb above 4% by the second half of 2022.
Specifically, they predicted that the average rate for a 30-year fixed mortgage loan would hit 3.5% by the last quarter of this year. Looking into 2022, they expect them to average around 4% by the third quarter and 4.2% by the fourth quarter.
Translation: They expect mortgage rates will stay historically low into 2022, but will be higher than where they are right now. Based on their most recent outlook, anyway.
A housing market forecast published by Freddie Mac back in July made somewhat similar predictions. They also expect mortgage rates to stay fairly low into 2022, despite a gradual increase. Unlike the MBA outlook mentioned above, the research team from Freddie Mac expects 30-year home loan rates to average below 4% all through 2022.
The Truth: We Don’t Know for Sure
Recent trends and forecasts suggest that mortgage rates could stay low in 2022. But there is also reason to believe they could rise gradually over the coming months, and perhaps climb above 4% by the end of 2022.
But this is all speculative in nature. These kinds of predictions are basically an educated guess based on current trends and expectations for the future. They could turn out to be accurate — or not. Only time will tell.
The truth is we don’t know for sure if mortgage rates will stay low in 2022, like they are right now. But in the spirit of making an educated guess, let’s talk about some of the factors that might cause mortgage rates to climb over the coming months.
- Inflation: Historically speaking, mortgage rates tend to rise during periods when inflation is rising. Inflation in the United States rose for much of 2021. That trend could continue going forward, through the end of this year and into 2022. If it does, it would likely put upward pressure on mortgage rates.
- Economic growth: Similarly, home loan interest rates (and consumer borrowing costs in general) tend to rise during periods of economic growth. And we’ve seen plenty of economic growth during 2021, despite the ongoing stumbling blocks delivered by the pandemic. This too could put upward pressure on mortgage rates over the coming months.
- Federal Reserve: “The Fed” does not control consumer interest rates directly. But their policies do have an indirect effect on mortgage rates and other borrowing costs. Fortunately, Federal Reserve officials have already stated they plan to keep the short-term federal funds rate near zero well into 2023. This policy could help mortgage rates stay low in 2022, despite some gradual upward creep over the coming months.
That’s a somewhat hypothetical answer to a very common question: Will mortgage rates stay low into 2022, or start rising?
The truth is we can’t say for sure. But there are some factors that could lead to a gradual increase in home loan rates through this year and into next. And more than one forecaster has already predicted that rates will be higher in 2022 than they are right now.
As for home prices, they’ll almost certainly continue rising in most U.S. cities, into 2022.