Rate Outlook for 2022

2021 was a year of records. The average 30-year fixed mortgage rate reached its all-time low of 2.65%, and inflation hit a 39-year high. However, mortgage rates spiked to kick off the new year. They hit their highest levels since May 2020, and experts predict rising mortgage rates will continue to be a theme this year.

Why?

The Federal Reserve plans to raise short-term interest rates 3 times in 2022 in order to combat elevated inflation amid the economy’s ongoing recovery. Additionally, the Fed. recently announced it would speed up its plans to taper bond purchasing. Don’t forget: the Fed’s bond purchases throughout the pandemic kept mortgage rates artificially low. As the Fed pulls back on those purchases, mortgage rates will almost certainly rise.

The Fed currently expects to end its mortgage stimulus program by March or April of this year. That could mean significantly higher rates for the first quarter of 2022. On the other hand, COVID-19 looms as a threat to our public and economic health. The possibility of new COVID-19 variants could stall economic progress and bring mortgage rates back down.

One clear takeaway:

Although rates are predicted to rise, they remain near all-time lows and borrowers have access to rates lower than almost any other time in mortgage rate history. If you’ve put off refinancing a home or purchasing a new home, this might be the time to do it. The window to take advantage of today’s low-rate environment could close quickly.