Navigating Rising Interest Rates in 2022

Inflation is on the rise in seemingly every facet of our lives; from the grocery store to the gas pump, there’s just no avoiding it, and interest rates seem to be following suit. In 2020 the fed lowered mortgage rates to combat the pandemic’s economic crash, but rates are rising as the country makes strides toward a new and more stable economy.

Don’t let this steer you off course in your homebuying journey just yet, interest rates may be up a couple of percentage points from their all-time low in 2021, but it’s essential to understand that they’re still at a historical low. Locking in these rates before they rise further could result in significant savings over the life of your home loan, avoiding housing cost increases and leaving you with an asset that potentially gains value over time.

As financial analysts urge buyers to “act quickly while market conditions are still favorable,” we’re here to share everything you need to know about the recent increases. Join us as we explore these interest rate changes, 2022 projections, and how to cover yourself from some of these rising costs.

Rates are STILL at Historic Lows

Freddie Mac Primary Mortgage Market Survey

While rising interest rates are always unwelcome news for homebuyers, the above chart from Freddie Mac shows the average mortgage rate over the last 50 years has been 8%, still significantly higher than the rates today. In fact, today’s rates are pretty comparable to the rates we saw in 2018 before the start of the pandemic.

Looking back at historical milestones, the all-time peak hit in 1981 when mortgage rates skyrocketed as high as 18.63%. This slowly tapered off over the next two decades, leaving the average rate fluctuating around 7-10% through the 90s and early 2000s until hitting its slump in 2008.

The record low rates we’ve been enjoying for the last couple of years resulted from urgent actions taken by the Federal Reserve to combat the economic crash brought on by the pandemic. In July 2020, rates fell to 3% on 30-year fixed mortgages and plummeted to 2.65% by January 2021 for the first time in history. The combination of the economy recovering its pre-pandemic state and a higher inflation rate than we’ve seen in four decades has pushed the federal government to tighten policies. Those policy changes mean continued increases are likely. It also means there’s still time for homebuyers to take advantage of current financing.

Mortgage Rate Predictions for 2022 — No Slow Down In Sight

In March 2022, the fed announced that it would be tightening policies to answer rising inflation with what the Guardian is calling “the sharpest rise in interest rates in over 20 years”.
This rise just put rates back on par with what we saw pre-pandemic. However, reports suggest more to follow in the coming year.

Protect yourself from increasing costs

Inflation is on the rise, and even with new efforts being put in place, there’s no telling when it will slow down. Average prices for consumers have risen 6.6%, the most significant increase since the 1990s. So how do you shield your wallet from all these increases? James Royal, Senior Wealth Management Reporter at Bankrate, suggests locking in a mortgage at the current low rates to keep monthly payments from fluctuating over time. “A fixed-rate mortgage allows you to maintain the biggest portion of housing expenses at the same payment. Sure, property taxes will rise…but your monthly housing payment remains the same.”

Mortgage Rates are Rising, and So is the Price of Rent.

As the cost of everything goes up, rental prices rise to meet them. As mentioned in our March blog, Californian’s average monthly mortgage payments are typically lower than the average rental prices in the area. Jamie Johnson at Rocket Mortgage recently weighed in on encouraging potential buyers to crunch the numbers. Johnson suggests, “you may find that your mortgage payments would cost less than you’re currently paying in rent.”

In conclusion, even with the small rise we’ve seen recently, rates are still at a historic low. There may be signs of upward trends to come, but the window to lock in these great rates is still wide open. What matters most is that it’s an ideal time for you to make your dreams of homeownership a reality. Reach out to our concierge team today and get pre-approved with one of our preferred lenders to secure your spot on the VIP priority list.
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