Mortgage rates unlikely to reach 4% in 2022, but 'within the realm of possibility,' expert says

Although average mortgage rates have been on the rise since the beginning of 2022, it's unlikely that they'll reach a 4% annual percentage rate (APR) this year, according to one mortgage expert. 

"It still looks unlikely that rates will hit 4% this year, but it’s within the realm of possibility as we are now squarely in the 3%+ range on 30-year fixed conventional mortgages," said Robert Heck, vice president of mortgage at online broker Morty. "Any time we see this type of volatility, credit products typically under-perform on the secondary market, so there is the possibility that mortgage rates might level off if the bond market becomes range-bound in the short term.

The 30-year fixed-rate mortgage rose to 3.69% APR for the week ending Feb. 10, according to Freddie Mac’s Primary Mortgage Market Survey. In addition, the 15-year increased to 2.93% and the five-year Treasury-indexed hybrid adjustable-rate mortgage also grew to 2.8%.

"There’s a number of secondary market factors to consider when looking at whether rates will hit 4%, but inflation and volatility should be closely watched," Heck said. "The volatility we’re seeing right now will likely continue over the coming months, making it difficult to predict where the market is headed overall."

If you are interested in refinancing your home loan amount while interest rates remain within the 3% range, visit Credible to find your personalized interest rate without affecting your credit score.

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Slowed economic growth could keep interest rates lower

Although the U.S. economy is on a path of recovery following the COVID-19 pandemic, there are several factors that could slow down that growth, therefore keeping interest rates lower. 

"While many economic indicators are strong and suggest continued market health over the coming year, factors like inflation, increasing rates, continued price growth and the potential for unforeseen uncertainty, could combine to slow things down," Heck said.

If you want to take advantage of low interest rates, consider refinancing your mortgage to lower your mortgage payments. Visit Credible to compare multiple lenders at once and find the best mortgage lender with a lower interest rate for you.

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Demand for homes to remain hot in 2022

Current mortgage rates are likely to continue rising as the Federal Reserve considers up to three interest rate hikes in 2022. Despite this, however, Heck said that the housing market is anticipated to remain strong.

"For consumers, the purchase market will likely remain hot over the next few months, as many of the strong demand drivers from 2021 are still present," he said. "Supply is increasing, with housing starts surging towards the end of the year, but it will take time to eat into demand. We should also expect fierce competition among lenders in this market environment, proving the value of marketplace models within the mortgage ecosystem. 

"That said, there’s a lot of attention being paid to price growth and inflation right now," Heck continued. "Prices increased 18.05%, on average, between the third quarters of 2020 and 2021, which drove the conforming loan limit increases that took effect in Q4 of last year. Pricing models vary widely in their predictions, but should continue to increase in most areas, barring a major credit crunch."

Borrowers who want to take advantage of rising prices may want to consider a cash-out refinance in order to tap into their home's equity and possibly lower their monthly mortgage payment. Contact Credible to speak to a home loan expert and get all of your questions answered.

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