The housing market, a booming industry in the summer, is known to cool down in the winter months. This past summer was no exception due to continued low interest rates and high homebuying demand seen throughout the COVID-19 pandemic.
This winter, however, has not seen the same sleepy season it typically endures. Economists forecast that the steadily increasing mortgage rates will contribute to an atypically busy winter homebuying season, as individuals look to purchase properties before mortgage rates increase any further.
According to CNBC, “the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) increased to 3.52% from 3.33% for loans with 20% down payment.”
Mortgage rates have not been this high since nearly two years ago in March 2020, when the rate sat at 3.5%. Higher rates have prospective homebuyers wondering if their window of opportunity to purchase a home while it’s affordable is closing.
Mortgage Bankers Association reported that early January 2022 saw a 2% rise in loan applications that falls in line with real estate agents reporting an earlier than anticipated start to housing demand. Although the market is seeing high demand for housing, the market is not producing a sufficient housing supply to meet the demand—making the market as competitive as ever.
Are Mortgage Rates Expected to Continue Rising?
Economists are projecting that homebuyers should not get too comfortable with the low rates we’ve experienced over the past year.
Last year, 2021 started with mortgage rates at 2.67% and ended the year at 3.12%. This increasing trend followed into the 2022 new year as the United States sees rising inflation rates.
While some economists believe inflation will rise to the mid to high three percentage point, chief economist for the Mortgage Bankers Association (MBA), Michael Fratantoni believes, “rates could reach 4% by the end of 2022.”
Higher rates do not bode well for homeowners looking to refinance their properties. As mortgage rates rise, refinancers seem to be taking a pause until rates revert to their lower percentages.
On the other hand, some economists looking at the Treasury yield as a guide for market rate projections don’t believe that mortgage rates will rise as high.
In an article by Forbes Advisor, Robert Frick, the corporate economist for Navy Federal Credit Union explains, “Given mortgage rates are closely tied to the 10-year Treasury yield, and that yield isn’t expected to rise much in the next year—if at all—rates could rise slightly but are likely to remain below 3.5%.”
Overall, economists believe the mortgage rate growth will not jump high enough to disrupt or shock the market. Besides inflation rates rising, another possible mortgage rate influencer is COVID-19. Another spike could cause the economy to retreat, thus creating lower mortgage rates.
Potential rises in mortgage rates may cause the housing market to heat up during the typically slower winter season as homebuyers seek to take advantage of low rates while they are still around.
To learn more about market rates, visit our page here. See where the current market rate sits below.