Mortgage rates surge to highest level since May 2020

Mortgage rates surged at the start of 2022 to the highest level in nearly two years as markets reacted to the news that the Federal Reserve is considering raising rates soon, according to the latest data from Freddie Mac.

The 30-year fixed-rate mortgage loan jumped to 3.22% for the week ending Jan. 6, up from 3.11% the week before. This marked the highest point since May 2020 and is also up from the same time last year, when the 30-year mortgage rate averaged 2.65%.

"Mortgage rates increased during the first week of 2022 to the highest level since May 2020 and are more than half a percent higher than January 2021," Freddie Mac Chief Economist Sam Khater said. "With higher inflation, promising economic growth and a tight labor market, we expect rates will continue to rise. The impact of higher rates on purchase demand remains modest so far given the current first-time homebuyer growth."

Homeowners can still benefit from refinancing their mortgage before rates go up any further. Even with the most recent increase, mortgage rates remain historically low, and refinancing can help them save on their mortgage payment and over the life of the loan. Visit Credible to find your personalized mortgage rate today without affecting your credit score.

MBA PREDICTS 2021 TO BE THIRD-HIGHEST YEAR FOR MORTGAGE REFINANCES, SLOWDOWN IN 2022

Mortgage rates to continue to climb

The 15-year fixed-rate mortgage also increased this week to 2.43%, up from 2.33% last week and 2.16% last year, according to Freddie Mac. The five-year Treasury-indexed hybrid adjustable-rate mortgage remained unchanged from last week at 2.41%, and was still down from last year’s 2.75%. Experts predict that mortgage rates will continue to climb from here as the economy improves. 

"The Freddie Mac fixed rate for a 30-year loan accelerated its upward momentum this week, with an 11 basis point surge to 3.22%," George Ratiu, Realtor.com manager of economic research, said. "The strong advance followed the jump in the 10-year Treasury to the highest level since March 2021, following the release of the Federal Reserve’s December meeting minutes, which indicated the central bank is preparing to initiate balance sheet reduction measures quickly in the months ahead. 

"While mortgage bond investors had taken a wait-and-see stance for the past couple of months, the impact on the economy from the omicron variant seems marginal," Ratiu said. "The variant appears to be milder, and economic data is showing strong resilience. In short, I expect the upward momentum in Treasury rates to continue to drive mortgage rates higher."

If you want to take advantage of today's mortgage rates before any further increases, you could consider refinancing to save money on your monthly payments. Visit Credible to compare multiple mortgage lenders at once and choose the one with the best interest rate for you.

FED’S DECEMBER MEETING REVEALS POSSIBLE EARLIER, FASTER INTEREST RATE HIKES

There is still good news ahead for homebuyers

While rising rates and higher home prices signal more out-of-pocket costs for homebuyers, Ratiu said there is reason to believe the housing market could get easier to navigate in the year ahead. 

"Milder COVID symptoms could spell an end to the pandemic at some point during the year, especially as we move beyond the winter months," he said. "This will further boost economic activity and consumer spending. We also expect more homeowners to act on pandemic-delayed plans and list their homes for sale, which, combined with strong new-home construction, should boost supply. The combined effect of these factors would translate into more homes at better prices for many buyers in 2022."

If you are interested in taking out a new mortgage to buy a home or want to refinance your current loan, contact Credible to speak to a home loan expert and get all of your questions answered.

Have a finance-related question, but don't know who to ask? Email The Credible Money Expert at moneyexpert@credible.com and your question might be answered by Credible in our Money Expert column.