Recent Freddie Mac research indicates that the average 30-year fixed-rate mortgage has increased by 1.2% (3.22% to 4.42%) since January of this year. The rate jumped by more than a quarter of a point from just a week ago. This graphic shows how mortgage rate movement throughout 2021 was steady compared to the rapid increase in mortgage rates this year:
A few months prior, Freddie Mac projected mortgage rates would average 3.6% in 2022. Earlier this month, Fannie Mae forecasted mortgage rates would average 3.8% in 2022. As the chart above shows, rates have already surpassed those projections.
Sam Khater, Chief Economist at Freddie Mac, explained last week:
“This week, the 30-year fixed-rate mortgage increased by more than a quarter of a percent as mortgage rates across all loan types continued to move up. Rising inflation, escalating geopolitical uncertainty and the Federal Reserve’s actions are driving rates higher and weakening consumers’ purchasing power.”
Where Are Mortgage Rates Going from Here?
Several industry experts have weighed in on where rates might be headed going forward. The following are some of their forecasts:
Greg McBride, Chief Financial Analyst, Bankrate:
“With inflation figures continuing to surprise to the upside, mortgage rates will remain above 4.0% on the 30-year fixed.”
Nadia Evangelou, Senior Economist and Director of Forecasting, National Association of Realtors (NAR):
“While higher short-term interest rates will push up mortgage rates, I expect some of this impact to be mitigated eventually through lower inflation. Thus, I expect the 30-year fixed mortgage rate to continue to rise, although we aren’t likely to see the big jumps that occurred over the past few weeks.”
Len Kiefer, Deputy Chief Economist, Freddie Mac:
“Mortgage rates are likely to continue to move higher throughout the balance of 2022, although the pace of rate increases is likely to moderate.”
An expert from Realtor.com concurs:
Danielle Hale, Chief Economist, realtor.com:
“. . . As markets digest the Fed’s updated economic projections, I anticipate a continued increase in mortgage rates over the next several months. . . .”
What Does This Mean for You as a Redondo Beach Homebuyer?
With both mortgage rates and home values expected to increase throughout the year, it would be better to buy sooner rather than later if you’re able. It will cost you more the longer you wait.
There is, however, a possible silver lining to buying a home right now. While you’ll be paying a higher price and a higher mortgage rate than you would have last year, rising prices do have a long-term benefit once you buy.
Homebuyers must consider that their mortgage payments play into the substantial growth in equity that comes with the escalation in home prices. A recent survey revealed that the average of experts’ forecasts calls for a 9% increase in home values in 2022.
Buying a home in Redondo Beach today means the equity in your home will already begin to build substantially within the year. Increase in your net worth is also tied to your home - this is one way to put the home price appreciation to use in a way that benefits you.
Paying a higher price for a home in Redondo Beach plus a higher mortgage rate can be a difficult pill to swallow. However, waiting will just cost you more. If you’re ready, willing, and able to buy a home, now will be a better time than in a year, or even six months from now.
Connect with Dennis Hartley to start the process today.