Mortgage rates predicted by forecasters to climb as high as 4% by years end
The average mortgage rate for 2022 is already higher than at any point in 2021, as inflation increases, and the economy seeks to continue recovering from the COVID-19 pandemic.
30-year fixed-rate mortgages are at 3.22% the week of Jan.6, up from 2.65% a year ago, which was the lowest number ever recorded.
“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,” Sam Khater, Freddie Mac’s chief economist, told CNN Business.
The higher mortgage rates are not a surprise, as the economy attempts to bounce back, and inflation continues to climb.
“With higher inflation, promising economic growth and a tight labor market, we expect rates will continue to rise,” Khater told CNN Business.
Forecasters say mortgage rates should continue to climb as 2022 goes on, with predictions ranging from an average of 3.7% to almost 4% by the end of the year, according to CNN Business.
“This could make home affordability an even greater challenge — especially for lower income buyers,” Jacob Channel, LendingTree’s senior economic analyst, told CNN Business. “Fortunately, rising rates aren’t all bad news, as higher rates will likely mean fewer new homebuyers and an overall less hyper-competitive housing market.”
Mortgage applications and refinance requests were down at the end of last year, and the inventory for housing is still at a record low, which is all helping high prices remain.
“For buyers still reeling from last year’s overheated market and sky-high prices, fast-paced inflation is squeezing their budgets, and offsetting low mortgage rates,” George Ratiu, Realtor.com’s manager of economic research, told CNN Business.
The movement of mortgage bond investors also plays a role in interest rates, and, for now, they are taking it slow as they wait and see what the omicron variant ends up doing to the economy, according to Ratiu.
“The variant appears to be milder, and economic data is showing strong resilience,” said Ratiu. “I expect the upward momentum in Treasury rates to continue to drive mortgage rates higher.”